How to avoid tax risks in asset purchase and sale operations

Asset purchase and sale transactions, for both buyer and seller, involve a significant outlay and a significant collection.

In this case, both parties have to bear certain taxes, but it is extremely important to make sure that you are aware of the different circumstances.

Let’s check:

1. Consult a certificate of debts to the Tax Agency.

Obtaining a certificate of debts from the Tax Agency is a way for the buyer to cover his back before and after purchasing a property.

Firstly, if the certificate is issued before the purchase, the buyer will only be liable for the debts generated until the certificate is issued.

On the other hand, if the certificate is free of debts or is not sent within a maximum of 3 months, the buyer will be free of debts to the administration.

As an initial element, together with the due diligence, it can help to minimise the risks.

And you can also request a nota simple from the Land Registry to check that there are no outstanding debts on the property.

Therefore, this is an initial precaution you should take.

2. Ensure that the asset valuation is correct.

The valuation of the assets has to be correct, both at the level of the buyer and the seller.

In the first case, because it will avoid tax problems in the future due to tax inspections, if the value of the transaction is considered to be suspiciously low.

In the case of the seller, because he will be able to maximise the sale, giving the asset the value it deserves.

Independent valuers or companies specialising in this work have usually been chosen.

If both parties agree, this is the best way to value the asset at market prices.

The more reliable the appraiser is, the better, especially since valuations have an element of subjectivity.

3. Check which tax deductions or exemptions you may qualify for

The purchase and sale of assets may be subject to different tax deductions or exemptions.

Firstly, depending on the legal status of the person acquiring the asset; secondly, depending on the location of the asset; and finally, depending on the sector of professional activity.

It should be noted that these tax deductions or exemptions can be applied to the buyer, the seller or both parties.

There are special regimes for paying VAT or corporate tax (tax consolidation).

For this reason, it is essential to seek advice from a specialised agency.

Likewise, although capital gains must be declared, if there are any, a series of specific calculations must be carried out.

In some cases there may not be any, and this is not minor because it would imply tax savings.

4. Declare 100% of the transaction value to avoid tax risks.

Although this may seem obvious, it should be stressed.

Some professionals or companies choose to declare only a percentage of the transaction value.

What happens is that if that value is below market value, the tax authorities are likely to carry out inspections and enquiries.

For this reason, not declaring the value of the entire transaction involves a certain risk.

And the penalties in this respect are not minor.

Moreover, depending on the amount defrauded, it could constitute a tax offence which could lead to imprisonment.

Therefore, and in order to avoid tax risks that can be costly in all respects, we recommend declaring 100% of the value of the transactions.

It is from there that the taxable income for tax purposes will be declared.

5. Avoidance of double taxation in international business

Avoiding double taxation in international companies is another key element.

In addition to double taxation treaties, it should be noted that there are intra-Community compensation systems for certain taxes.

This is key for international companies with activities in Spain.

Once again, we recommend that you consult specialised consultancy firms.

This is a way to save a significant amount of tax.

Keep in mind that there are several international agreements and that this can be an advantage when it comes to optimising tax payments.