The so-called Equity Crowdfunding, is a form of Crowdfunding in which investors, through monetary contributions, get a participation in the capital of the company with a return on the investment through profits, income or capital of the company. In this sense, Real Estate Crowdfunding is a type of Equity Crowdfunding that is developed in the so-called Participatory Financing Platforms such as Icrowdhouse and through which investors make financial contributions for the acquisition of existing real estate or for the start-up of new real estate projects.
In accordance with the provisions of article 25 of Law 35/2006, of November 28, on Personal Income Tax and partial modification of the laws on Corporation Tax, on the Income of Non-Residents and On the Equity, the income obtained by individuals through real estate Crowdfunding, must be taxed as income from movable capital, that is to say in the same way that happens with the interests obtained by deposits in financial institutions.
Income from movable capital
Income from movable capital is considered to be profits or consideration, whatever their name or nature, that come, directly or indirectly, from movable capital, and, in general, from assets or rights not classified as real estate. The returns corresponding to the patrimonial elements, assets or rights, which are exclusively assigned to economic activities carried out by the taxpayer, will be included among those from the corresponding activities
They are regulated in articles 25 and 26 of the Personal Income Tax Law. The following are considered full returns:
- Income obtained from participation in equity of any type of entity.
- Income obtained from the transfer of own capital to third parties
- Income from capitalization operations, life or disability insurance contracts
- Other income from movable capital
The most frequent examples are: checking accounts and deposits, stock dividends, coupons of fixed income securities, transmission or amortization of fixed income securities, structured products or life or disability insurance.
Crowdfunding Taxation in Spain
The crowdfunding taxes When it is invested in the capital of a company and this distributes dividends, they are the same as those that tax any Income from movable capital.
The type of taxation that is applied to the income obtained is applied by the Treasury progressively and according to the following sections:
- Taxes at 19% for the benefits obtained that are less than € 6.000.
- Taxes at 21% for the benefits obtained that are between € 6.000 and € 50.000.
- Taxes at 23% for profits obtained over € 50.000.
Interest or dividends will be subject to a withholding of 19% (payment on account of the IRPF).
The promoter of the Real Estate Crowdfunding project will be in charge of making the withholdings and liquidating the payment on account of the personal income tax before the Tax Agency, of the benefits that are distributed to investors. It must be taken into account that the Spanish tax system does not apply to the individual benefits of each crowdfunding investment that has been made, but to the total that is made on the sum of all the returns obtained. Taxation for the benefits obtained for non-resident foreigners who invest in real estate Crowdfunding are also subject to withholding on the so-called non-resident income tax (IRNR).
As regards dividends, if the investor is a resident of a State that has signed a Double Taxation Agreement, they will be taxed in Spain with the limit provided in the CDI. And in the case of being a resident of a State that has not signed an agreement, they will be taxed in Spain at the rate of 19%.
Regarding the interests, the promoter will not make any type of withholding and the interests obtained must be declared according to the regulations of the country of tax residence. If the investor is a legal person, the profits that the companies that have invested in real estate crowdfunding are included in the Corporate Tax Base at the corresponding tax rate.
There is another type of real estate investment called Real Estate Crowdlending whereby investors lend capital to a real estate developer to develop a project, in exchange for an interest on the borrowed capital. Repayment of the loan varies depending on the conditions that have been established between the platform participatory funding promotes and carries out the viability plan of the project, and the promoter, the interest receivable investors for the loan made, may be of interest fixed or type called participatory in which the return and the amount of it is associated with the profitability of the project.
The investor or Lender Crowdlending, as occurs in the case of the inverter Crowdfunding Property, you must be taxed as income tax for interest and according to the same steps provided, and may vary from a minimum of 19% up to 23 %, in this case it is the borrower who is obliged to make the withholdings and present the certificate of those made.
One consideration to take into account: if the benefits obtained by the investor are left in the account they have on the Platform to return to make new investments, the Treasury considers it as a realized benefit and therefore is subject to tax from the moment they the deposit has been made in the account. Likewise, it is important to bear in mind that if the Crowdlending platform is located outside of Spain, within the European Union, the platform does not carry out withholdings and it is the investor who must inform the Tax Agency of the benefits obtained from the investments in Crowdlending that you have made. As for legal persons, as in the case of real estate Crowdfunding, taxation is the usual Corporation Tax.
Crowdfunding taxation in Spain
Here are some binding inquiries made to the General Tax Office on Crowdfunding and Crowdlending issues.
Binding Resolution of the SG of Taxes on Persons V2107-18 of July 17, 2018.
| DESCRIPTION-FACTS (SUMMARY) The consulting entity is a company whose activity is what is known in English as "Crowdfunding" or "Crowdlending", that is, the use of one or more digital platforms to finance applicants. Specifically, the activity consists of using digital platforms so that they put investors who have money to invest in contact with a multitude of companies seeking fixed-rate loans for a term between 90 days and 3 years and at a competitive interest rate. |
| QUESTION-POSED If the activity carried out by the consultant meets the requirements indicated in article 5 of the LIS for the purposes of determining that said entity carries out an economic activity for tax purposes. |
Binding Resolution of the General Directorate of Taxes, V1342-18 of May 23, 2018.
| DESCRIPTION-FACTS (SUMMARY) The interested party has made contributions to different companies based abroad whose activity is Crowdlending. The consultant makes contributions to the company abroad by bank transfer to an omnibus account, receiving interest on the loan. The company located abroad makes available to end customers so that they can obtain capital in a fractional way. The consultant participates in a very small way (€ 10-50) in each final loan. |
| QUESTION-POSED Obligation to present form 720. |
Binding of SG resolution INTERNATIONAL TAXATION, V1342-18 of May 23, 2018
| DESCRIPTION-FACTS (SUMMARY) Spanish company whose purpose is various Internet services, and whose main activity, called "Crowdlending", consists of putting in contact, as an online platform through its website, individuals (not businessmen or professionals) who need a loan to acquire goods and services for private use, with investors (not businessmen or professionals) willing to grant it. In this way, borrowers get cheaper loans and lenders more attractive returns. |
| QUESTION-POSED In relation to the payment of interest in favor of tax resident investors in the EU, the following are consulted regarding: - Declarations to be submitted to the Spanish Tax Administration. The Company considers that it is only Form 299.- Documentation proving the tax residence of the investor that allows not to apply any withholding on behalf of the IRNR.- Yes, in the event that specific accreditation of the tax residence is required, if it would be enough with having certificates or letters of recognition of tax residence issued by the tax authorities of the States of residence in their original language. |
The information indicated in this article is merely for guidance purposes, so it is advisable for investors to consult with a tax advisor or the Tax Agency, in order to ensure in each case the proper declaration of the income that has been obtained. both in the cases of real estate investments by Crowdfunding and Crowdlending.
