Investors | TAXATION

Below you will find a brief summary of the current tax requirements, applicable to Spanish residents, relating to products in our Marketplace. This is merely a summary and under no circumstances does it constitute legal or fiscal advice. It should be used for information purposes only.

The information provided on this page is not applicable to investors that are not Spanish tax residents. It is solely applicable to Spanish private individuals, or legal entities, that have invested in loans or pagarés from our Marketplace.

This information is not applicable to investors of certain profiles, such as pension or insurance funds, as these investors are subject to additional rules.

The information may vary due to modifications in Spanish fiscal laws that may be made from time to time.

Investors are advised to consult with their own financial advisor regarding the fiscal implications associated with lending, or transferring a loan, and the receiving of interest derived from participations in loans.

Taxation of interest generated from credits (loans and pagarés) found in our Marketplace is identical to that of funds deposited in a traditional bank. Interest will be subject to personal income tax (IRPF in Spain) in respect of income from capital assets. The tax rate will depend upon the taxable base set out in the following table:

When making interest payments to investors, the borrower will make a retention in respect of IRPF according to the lowest marginal rate (21%). When filling out their tax return, investors are entitled to apply these retentions as compensable credit when calculating their obligations with respect to income from capital assets.

These retentions will fully meet the obligations of investors who are subject to the lowest marginal rate. Investors who are subject to a higher marginal rate of tax may be obliged to pay up to 6% more on income from capital assets, depending on the marginal rate category they fall into.

Private, individual investors whose tax obligations are lower than the applied retention, may be eligible for a rebate.

An investor decides to invest €50,000 in a variety of loans and / or pagarés and, in 2014, receives €5,000 of interest.

When making interest payments, the borrowing businesses will retain; 21% x €5,000 = €1,050.

Assuming that the investor has not received any other income from capital assets that would take him into a higher marginal rate band, his tax return will look something like this:

Losses incurred on the principal of the loans and / or pagarés can be used to offset capital gains made elsewhere, whether they be in the form of loans or any other type of capital gains, generated in the same tax year, or over the following four years.

The gains generated by the transfer (or sale) of a loan, or participation in a loan, will be subject to IRPF on income from capital assets* as described in the previous section. Qualifying expenses associated with the acquisition and transfer of the loan can be taken into account when calculating gains.

However, a private individual buying a share from another investor is not obligated to make a retention relating to any gains achieved by the seller of the loan. Therefore, if you, as a private investor, buy a participation in an existing loan, you will not have to make any retention relating to gains made by the seller (if there happens to be any).

On the other hand, a legal entity (e.g. a corporate investor) buying a participation from another investor is obligated to make a retention relating to any gains achieved by the seller of the loan. Therefore, if you sell a participation in an already existing loan to a legal entity, you will be required to make a retention payment relating to the gains achieved by you (if there happens to be any), according to the applicable rate, (21%).

In such a scenario, LoanBook will take care of calculating the retention amount required by any sale/purchase activity, and will make it known to both parties on settlement of the sale/purchase.

The sale or transfer of a loan or pagaré, however it comes about, is classed as an asset transfer, which is subject to, but exempt from, Impuesto sobre Transmisiones Patrimoniales (ITP: a transfer tax) and Actos Jurídicos Documentados (AJD: a stamp duty), according to article 45.1.b 15 of the Revised Text of the ITP.

However, regardless of the exemption from these duties, because it relates to an asset transfer, there is a formal requirement to file a tax return, where the exemption will be reflected explicitly. In other words, this exemption does not exempt you from filing your tax return. LoanBook will make these declarations on behalf of investors.

In the case of mortis transfers (transfers on death) of a loan or pagaré, the interest in the credit will form part of the estate of the deceased. As a result, beneficiaries must pay tax according to the Inheritance Tax base rate. The actual tax rate will depend on several factors, such as the Comunidad Autónoma (the autonomous ‘regions’ of Spanish) in which the beneficiary lives, their relationship to the deceased, and other specific circumstances of the beneficiary.

Interest earned, from loans and/or pagarés, by investors that are subject to corporate income tax will be subject to retentions made by the borrower, according to the applicable rate (21%).

Investors are able to include these retentions as compensable credit, alongside other fiscal activities in Spain. The final amount of the investor’s corporate income tax payments will depend on the individual circumstances.

On an annual basis, LoanBook will send investors a report containing summary information of activity over the previous financial year, in order to help complete IRPF or Corporation tax returns.