Large multinationals, in recent years, have looked for ways to pay a lower corporate tax, hence there are several litigations and claims in this regard by several European countries, highlighting the case of Apple.
This happens because, although there are some taxes that have to be settled at the place where the transaction is made, others have to be paid at the company’s tax headquarters. For this reason, the criteria can vary greatly and
make use of these tax engineering techniques that, on the other hand, are fully legal.
It should be borne in mind that, in Spain, the technological giants (Microsoft, Google, Amazon and Yahoo) have gone from paying one million euros in 2012 to paying 25.8 million in 2015,hence the criteria for tax declaration have been a source of conflict with the Tax Agency.
In any case, it is normal that there are discrepancies in the accounting of Corporation Tax,
VAT, Income Tax withholdings and the payment of commissions.
Corporate Income Tax in Spanish Multinationals
In the first place,Spanish multinationals have the obligation to inform the Tax Agency of the profits declared in the year,both for activities carried out in the Kingdom of Spain and in other countries.
Contrary to what many people believe, having an offshore company is not illegal, as long as its existence is declared and the corresponding taxes are paid.
There are several agreements against double taxation that, in principle, allow there to be no problems when declaring profits and carrying out the corresponding settlement.
However, Corporate Income Tax is usually one of the most important workhorses to be considered by large Spanish multinationals, given that the tax rate varies greatly depending on the State.
For example, if in Spain it is 25%, in Ireland it is 12.50% and in Malta, although the general rate is 35%, the exemptions mean that, in practice, it is 8% for non-residents.
For this reason, it is essential to keep in mind that the corporate tax rate will vary depending on the place where the company is installed.
The payment of VAT in large multinationals
Another of the fundamental elements for multinationals is the declaration of VAT (Value Added Tax), where there may be problems if they do not make it properly.
It should be remembered that, in the European Union, companies have the obligation to declare this tax to the Tax Agency when they make sales,even if it does not appear on the invoice.
Not paying VAT when it corresponds, or the disparity of criteria depending on the taxed product, is one of the main points of friction of Spanish multinationals with the Tax Agencies of the countries where they operate.
Personal Income Tax Withholdings
A problem that companies have is that corresponding to the withholdings of Personal Income Tax (Personal Income Tax) to their workers because, obviously, these have to be applied in the territory in which the economic activity is carried out.
This is one of the most problematic points when accounting for the taxes of multinationals.
A problem that arises is that, although a worker has to pay taxes according to the country in which he carried out the activity, sometimes there is a disparity of criteria on what is the type of tax that must be applied.
This is critical when referring to services through new technologies where it is relatively difficult to demonstrate where the work or service was generated.
Hence, many multinational technology companies have open litigation with the Treasury, precisely because the ambiguity in which this issue remains is a source of interpretations that each interested party takes to its field.
Payment of commissions
Royalties have always existed, but they take on special importance in e-commerce. For this reason, giants such as Google derive the payment of these commissions from its Irish subsidiary and most of the operations it carries out in Spain are invoiced from there.
As indicated, although this operation is technically legal, the Tax Agency has intensified inspections to detect signs of fraud.
In Spain, there is a recent ruling by the Supreme Court that obliges the computer company Dell to tax a part of its profits in the country.
This judgment, dated June 20, 2016,opens the door to, from now on, claiming from multinational companies the amount they actually invoice in the country,although it must also be said that there is still a high margin of interpretation.
In the short term, it is likely that large multinationals will continue to use companies based in countries that charge less corporate taxes, but there is a tendency for the Treasury to claim payment for what occurs in the place of usual activity of the company.