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V0599-20 16 March 2020 · SG de Fiscalidad Internacional Criterion in force
IRPF · ganancia patrimonial

Sale of shares in a real estate company to an Indonesian resident may be exempt from Spanish tax

An Indonesian resident enquires about taxation on the sale of 21.84% of a Spanish company whose assets are predominantly real estate. The DGT determines that capital gains are only taxable in Indonesia under the Double Taxation Agreement and examines potential VAT or ITPAJD liability for tax avoidance purposes.

The question raised

Question posed: Taxation of the sale of the holding in accordance with the Spanish-Indonesian Convention for the avoidance of double taxation.

The DGT's ruling

According to the Spain-Indonesia Convention, the gain from the disposal of shares is only taxable in the State of residence of the transferor; therefore, it is exempt in Spain and there is no obligation to withhold. Regarding VAT, the transfer of securities is exempt unless an intent to evade real estate tax is demonstrated. To apply the evasion rule, the characterization of the assets must be considered under VAT regulations, i.e., that they form part of the business assets.

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