11 July 2016 – Expansión
Operations / The company known as the bad bank states that value added tax is designed to be charged to end consumers and asks that it be allowed to deduct it on its incoming assets.
The bad bank was born when it received foreclosed properties and developer loans from the rescued saving banks; and its mission is to gradually divest all of the assets in its possession, before it is wound up in 2027.
The company chaired by Jaime Echegoyen has to pay VAT on the homes that it acquires and for the new properties that enter onto its balance sheet, those that are foreclosed due defaulted developer loans, but it is planning to file a request for permission to deduct this tax in light of the entity’s special nature.
That it what it will ask of the new Government that is created following the next elections, according to official sources. Its objective is that the future Government will refer its request to the European state, where, it seems, it will not face any regulatory problems in terms of its harmonised tax configuration.
The institution argues, firstly, that this tax is designed to be borne by the end consumer, but that the current wording of Law 37/1992 governing VAT, forces it to bear the cost during the exercise of its activity, in operations of a commercial nature.
Secondly, it states that given that it is not able to deduct the VAT, it is forced to pass the charge onto end consumers through its house prices, in such a way that buyers “suffers from an unjustified increase in the tax charge”, since they also have to pay tax on the asset transfer itself. In its opinion, “this bias may be overcome”.
Legal experts at the institution also maintain that allowing the bad bank to deduct VAT from its foreclosed properties, as well as from those received by means of “dación en pago” would not result in a decrease in the funds raised by the autonomous governments. By contrast, they consider that it would boost said amount, given that Sareb would no longer charge VAT that it has been allowed to deduct from the house prices and that decrease would result in an increase in the volume of operations and therefore in the number of properties sold, which means that income from taxes on property transfers would rise.
In terms of the change to regulations in Europe, Sareb argues that Directive 2006/112/CE provides for the possibility of exempting the payment of VAT: In general, it establishes that it is not possible to exempt the sale of properties from VAT before their first occupancy, but that any transfers that are carried out after that first occupancy should be exempt. Sareb hopes that this possible amendment will be accompanied by a transitory regime for second and subsequent sales of unoccupied homes acquired before the change enters into force.
Original story: Expansión (by A. Crespo and S. Arancibia)
Translation: Carmel Drake