1. CASE: DANISH FAMILY COMES TO BARCELONA GMN Congress, Verona 2015

2. Case objective
Assess the tax effects of moving Johan’s and Maria’s family
to Barcelona.
Following are explained the personal and business items to be
taken into account.

3. Preliminary considerations
Assuming the family is living in Barcelona (more than 183 days in the
country).
Taxable person must pay tax on all their worldwide income,
taking into account, the corresponding international double
taxation agreements.

4. There is the possibility to pay the income tax on non residents for
a term of 5 years, (people move to work or not resided in the last
10 years).
In this case, the only taxable income is what they generated and what they
have in Spain.
Tax scheme widely used by footballers (not possible now, only
maximum euros per year).

5. MATTERS TO CONSIDER

6. 1.- Is there a mechanism to separate the group so that Johan is offered all the shares in the company which owns the factory? If so, is this tax efficient?
-Income Tax Law establishes a complete tax neutrality in transactions of Corporate restructuration, so the potential gains are not taxable in the processes mentioned.
-It is possible a split of the two companies that form part of the Group, to produce a subsequent stock exchange transaction. Transaction between related parties (Transaction price of the market).
-Operations covered by these regulations are awarded tax neutrality.
-After this operation: Rune would have 100% ownership of the Company, which rents the old production plant, and Johan’s family would have 100% ownership of the company of mountaineering equipment.

7. 2.- Some of the minority investments could be sold to raise money to acquire intellectual property from Johan and to finance further research. What are the tax consequences of selling these investments?
-Sale of minority shares from the company of mountaineering equipment, should be taxed on the income tax for the profit generated at the general rate of tax (28% in 2015 and 25% in 2016).

8. 3.- If the group was to acquire the tent research from Johan and finance the further development of the prototype tent, what structure would you recommend for the further development of the prototype tent? Are there tax reliefs available for a Company to undertake research?
-If Group acquires R+D that Johan has made, the Group can benefit from deductions provided “Article 35 –Income Tax Law”, consisting of 30% deduction in the amount of tax. This percentage may reach 50% in the amount that exceeds the average amount invested in the previous years.
- An additional deduction of 20% and 10% on investments (excluding Real Estate and Land) may apply to staff costs assigned exclusively to R+D.

9. 4.- How could the 5% held by the senior employee be acquired from that employee? What are the tax implications for the Company, the acquirer and the employee?
-Shares owned by external managers may be acquired by the company itself establishing a treasury stock (does not generate taxes in the company).
-Manager himself has to pay personal tax for the profit obtained of the sale.
-This operation must be made in accordance with the value of these shares based on their book value.

10. 5.-Employees are to receive shares in the Company through a share option arrangement. What tax beneficial share option plans are permitted in your country and how do they work?
-It is possible to set an option plan and shares to the staff of the company. According to applicable law, the delivery to employees up to euros in shares of the company is not considered income in species.
-Conditions: should be an offer directed to the full team.
-If share option arrangement is only offered to managers, it is considered an extra wage remuneration taxed at the individual’s income.

11. 6. - How will shares in the Company be transferred to Hans
6.- How will shares in the Company be transferred to Hans? What are the tax consequences?
a) Case of family shareholding companies. There is an exemption of 95% of the value of parent to child transmissions. To qualify for this bonus you must fulfil the following requirements:
∙ The donor is 65 years of age or more
∙ The Entity is not a capital company
∙ Donor participation is 5% individually or 20% jointly
Johan is not over 65 years of age, therefore, he would not be eligible for the exemption. Only, in the case of transmission by “reason of dead” would these exemption be applicable, if not in a hurry in the transmission, he could leave the shares in the will.

12. b) Carry out a donation to a reduced rate of taxation for transmission from parents to children according to: ∙Up to euros taxed at 5% ∙From euros to euros taxed at 7% ∙More than euros taxed at 9% For Johan, the difference between the acquisition value of the shares and the transfer value to his eldest son, would generate a profit taxable in his income. c) Make a dealing in stocks from father to son. The child must justify the origin of the money to buy and the father has the same effect as in option b).

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