Participants in the virtual colloquium included Guillermina Ester, a partner in the Litigation and Arbitration practice, Javier Muñoz Méndez, a partner in the Real Estate practice and José Suárez, a partner in the Tax practice.
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The session began with Javier Muñoz Méndez explaining that the recent Royal Decree-law 15/2020 is applicable to all premises without any distinction as to the activity carried out by the establishment itself. Muñoz Méndez went on to explain what kind of requirements for application this Royal Decree-law establishes. On the one hand, in terms of subjective requirements, the tenants must be SMEs or self-employed. With regard to the objective requirements, the law states that the activity carried out by the tenant must have been suspended by an administrative measure or due to the state of alarm. Even if their activities have not been suspended, tenants whose turnover or whose income has been reduced by a 75% monthly average compared to the same month in the previous year can still apply for the measures provided for in this Decree-law. Muñoz Méndez pointed out that only objective requirements must be proved by the tenant by means of a certificate from the tax office or an affidavit, in the event that a reduction in income is claimed.
What are the measures established by Royal Decree-law 15/2020?
Javier Muñoz Méndez stressed that, when applying these measures, it is important to distinguish what is established in Articles 1 and 2 of Decree-Law 15/2020. Article 1 stipulates that only tenants whose landlord is a great urban property holder may benefit from these measures. A landlord is considered to be a large urban property holder if they own more than 10 urban properties or a property with a constructed surface area of more than 1,500 m2. With regard to this, the partner explained that the tenants may request a moratorium on the payment of rent, and must request it within one month of the regulation coming into force. This moratorium will be automatic and compulsory for the landlord, and will last until the state of alarm ends, with the possibility of extension for successive monthly periods up to a maximum of four months. Muñoz Méndez added that this moratorium does not generate any type of penalty, nor does it accrue interest and the amount must be paid back by the tenant within a period of two years from the conclusion of the moratorium period granted, unless the term of the contract is shorter.
With regard to Article 2, the partner explained that, in this case, the regulation only applies to tenants whose landlord is not a great urban property holder or a public housing entity or company. The rule states that the tenant may request a temporary and exceptional deferral of the payment of rent (the landlord may use the tenant’s deposit to offset the deferred amounts, if any), but does not indicate a minimum or maximum period in which this moratorium should be in force and does not set a period in which the amount that has been deferred should be paid. He noted that Article 2 also does not mention whether the deferral generates any interest or penalty for the tenant.
What is the tax impact of the agreements reached by the parties?
José Suárez went on to analyse the tax impact not only of the regulations contained in Royal Decree-Law 15/2020, but also of the agreements that may be reached by the parties. Regarding this, the partner explained that wherever rent payments are altered because of a remission, reduction or deferral, the taxation of the parties involved (income tax of the landlord or the tenant) or of the operation itself (VAT or the Canary Islands General Indirect Tax, IGIC) will be altered. According to Suárez, the analysis should be based on the regulatory compendium governing the relationship between the parties: in the first instance, the lease contract, and if this does not regulate this type of situation through the appropriate clauses, the urban leasing law or the civil code should be consulted. The partner stressed that Royal Decree-law 15/2020 encourages the parties to negotiate before applying any other clause or article.
In terms of taxation and VAT, Suárez explained that if the parties decide to agree on a deferral, the change in taxation will be relatively low or zero. Regarding VAT, the partner said that in the event of deferral it could be that the landlord must pay the corresponding VAT to the Spanish Tax Authorities on the relevant dates and the tenant will pay it on the date the parties have settled upon. If a discount on the rent is agreed, a lower amount should be reflected on the invoice and VAT should be levied on this reduced amount. Finally, in cases where the granting of free use is agreed upon, it will be necessary to determine whether one is dealing with self-consumption, which may not be subject to VAT if certain requirements are met.
With regard to the agreements adopted by the parties to adjust rent payments in line with the current economic situation, Suárez concluded that the legally established moratorium in Article 1 of Royal Decree-law 15/2020 and the agreements originating in Article 2 should be considered adequate and will have tax implications. In cases where these agreements are not regulated by the Royal Decree-law, it will be necessary to analyse both the mechanism for achieving it and the specific situation of the parties in order to rule out the possibility of non-deductible gifts (“liberalidades”).
What about force majeure and the rebus sic stantibus doctrine?
To conclude the virtual colloquium, Guillermina Ester analysed the concept of force majeure and the legal requirements for it to be deemed to exist, with special reference to the requirement of it being impossible to fulfil the obligations of the lease, both from the point of view of the tenant and the landlord. The doctrine and case law consider that the impossibility that defines force majeure must be legal or physical, as well as objective, absolute and lasting. The partner examined the figure of rebus sic stantibus and the possibility it offers to re-establish the balance of the contract in the event that an extraordinary change in circumstances alters the basis of the legal transaction. The rebus sic stantibus doctrine allows the modification of the terms of the contract or even the termination of the legal relationship, although it has been applied restrictively by our courts.
Finally, Guillermina Ester mentioned the possible judicial solutions currently being debated, from negotiation and mediation to the recent proposals made by the General Council of the Judiciary, the latter stressing the importance of reaching agreements between the parties to resolve this type of discrepancy.