gremicat

Separating Business Activities to Protect Your Business Assets

gremicat — Wed, 16 Sep 2026 07:00:01 +0000

As companies grow, so do their risks. What worked when the business was small can, over time, become a source of financial, asset-related, or even family problems. It is common to find companies that carry out several very different activities within the same organization. Although this structure may be convenient at first, it is not always the most appropriate as business volume increases.

Many companies started out by engaging in a single activity. However, over the years, business has evolved. New lines of business are added, real estate is acquired, services are diversified, or even new business units are created. And it is precisely at that point that it’s time to ask an uncomfortable question: Does it make sense to continue keeping everything within the same company?

The answer, in many cases, is no. We frequently encounter companies that carry out very different activities under a single corporate entity, sharing assets, cash flow, personnel, and administrative resources. If everything runs smoothly, the situation often goes unnoticed. The problem arises when a legal claim, an audit, financial difficulties, or a generational transition occurs.

As a result, many business owners discover that all their assets were exposed to the same risk.

Separating business activities can serve as a protective measure

Corporate restructuring allows a company to be reorganized so that each business activity operates within a separate entity, while maintaining a common management structure and, in many cases, a parent company or holding company. This decision can offer significant business advantages:

Protecting real estate assets from risks arising from operational activities.
Gain an accurate understanding of the actual profitability of each line of business.
Facilitate access to specific financing.
Improve financial management and strategic planning.
Prepare for future family succession or the addition of partners.
Facilitate the partial or total sale of the business.

Please note: If your company engages in different activities within the same corporation or owns significant real estate in addition to its operating activities, it is likely advisable to review your current structure.

Example

Consider a corporation that is simultaneously engaged in construction and real estate development, the sale of construction materials, and the leasing of real estate. The company also owns several industrial warehouses and commercial properties valued at 2,800,000 euros. Its annual revenue totals 4,500,000 euros. After analyzing the situation, the decision is made to reorganize the group:

The construction business is carried out by a separate company.
The commercial business is transferred to a second company.
The real estate assets remain in a holding company, which also coordinates the group’s management.

This way, any potential claim arising from the construction business would not automatically affect the real estate assets accumulated over the years. Furthermore, each business has its own earnings, financing, and strategy.

Let’s imagine the following scenario:

Protected real estate assets: 2,800,000 euros.
Revenue from the construction division: 2,700,000 euros.
Revenue from the commercial division: 1,800,000 euros.

A legal claim of 600,000 euros arising from defective construction work could seriously jeopardize the entire business’s assets if all activities are conducted through a single company. With proper corporate separation, the risk is significantly mitigated.

The Tax Authority also reviews these transactions

Tax regulations allow certain corporate reorganization transactions to qualify for the so-called special tax neutrality regime, thereby preventing the reorganization itself from triggering immediate taxation. However, to qualify, it is essential to demonstrate that the transaction is based on genuine economic and business reasons, and not solely on obtaining tax advantages.

Among other valid reasons, the tax authorities have considered the separation of risks, improved management, financial optimization, and the professionalization of the business organization to be reasonable grounds. For example, the General Directorate of Taxes (DGT) recently acknowledged this in Binding Ruling V1028-26, dated May 7, 2026.

Not all transactions are automatically eligible for the special tax regime. Each case requires a prior, individualized analysis of the business activity, assets, human resources, and objectives pursued.

Is now a good time to review your company’s structure?

You may want to consider a review if you find yourself in any of the following situations:

Your company engages in several different activities.
The company owns high-value real estate.
You are considering bringing in partners or investors.
A generational transition is imminent.
You wish to protect part of the company’s assets.
You are considering selling a business line.
You need to improve your financing or management reporting.

For more information, please contact our tax advisory service.

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Gremicat will be closed on September 11

gremicat — Thu, 10 Sep 2026 07:00:02 +0000

Gremicat will be closed on September 11 on the occasion of the National Day of Catalonia.

Please take this into account when planning your enquiries, visits or any administrative procedures you may wish to carry out at our offices.

We will resume our usual activities on the next working day.

We wish you a happy National Day of Catalonia!

A newly hired employee asks to change his work schedule

gremicat — Wed, 09 Sep 2026 07:00:55 +0000

When an employee requests an adjustment to their work schedule, the company cannot simply say no. It must review the request, negotiate, and justify its response. The problem arises when the requested schedule leaves the very time slot for which the employee was hired unfilled. In these cases, the company may object, but it must do so properly.

Requests to adjust work schedules related to caring for children or family members
are becoming increasingly common. This reality forces companies to manage
sensitive situations in which they must balance two equally legitimate interests: the
right to a work-life balance and the organizational needs that allow the business to
continue operating.

However, there is a widespread misconception. The fact that an employee can
request an adjustment to their work schedule does not mean they have the right to
freely choose the hours they wish to work.

A right that must be analyzed on a case-by-case basis

Article 34.8 of the Workers’ Statute (ET) recognizes the right to request adjustments to the distribution of the workday, the work schedule, or even the way work is performed when such adjustments facilitate work-life balance.

However, the provision itself requires that these requests be reasonable and proportionate, considering both the employee’s family needs and the company’s organizational or production needs. Therefore, the company’s response cannot be automatic—either in favor of or against the request.

The company must review each request individually. Ignoring or rejecting it without prior evaluation may increase the risk of legal dispute.

Adjusting one’s work schedule is a right to request, not an absolute right to obtain exactly the schedule requested. The company is obliged to review the request, initiate a negotiation process, and assess whether there are alternative solutions that would allow both needs to be met. If this is not possible, the company may deny the request, provided there are objective and sufficiently justified reasons.

Example

Consider a dental clinic that hires an assistant to work from 6:00 p.m. to 10:00 p.m., a time slot that coincides with the day’s final appointments, instrument sterilization, and the administrative closing of the workday.

Two months after starting the job, the employee requests to adjust her schedule to work from 3:00 p.m. to 7:00 p.m., citing the need to pick up her children from school and fulfill certain family obligations.

The company must review the request and evaluate possible alternatives. However, if the initially agreed upon schedule is specifically designed to cover the work required between 7:00 p.m. and 10:00 p.m., the requested change would leave an essential part of the service uncovered.

In this context, the company’s refusal could be justified, provided it is adequately justified.

If the requested change leaves the time slot for which the position was created uncovered, the company may object to the adjustment.

The Importance of Negotiating in Good Faith

One of the most common mistakes is simply responding that “it is not possible for organizational reasons.” Such a generic explanation is often insufficient. Before making a final decision, it is advisable to meet with the employee and explore other alternatives. For example:

Allow a temporary adjustment for certain months.
Consider minor adjustments within the initially agreed-upon schedule.
Examine whether there are any vacancies compatible with the requested schedule.
Establish flexible arrangements at specific times.

Even if it is ultimately not possible to grant the request, this process will serve as evidence that the company acted in good faith and attempted to reach a balanced solution.

Prior negotiation can be decisive if the company’s decision is later challenged in court.

The response must be properly justified

When the company decides to reject the request for accommodation, the notification must be in writing and contain specific arguments.

It is not enough to simply state that there are organizational needs. It is necessary to explain:

What business need justifies initially agreed-upon schedule?
What duties would be neglected if the proposal were accepted?
What alternatives were considered during the negotiation process?
Why are those alternatives not feasible in this specific case?

The more specific and detailed the justification, the greater the legal certainty of the decision reached.

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An Employee’s Bonus During a Medical Leave

gremicat — Wed, 02 Sep 2026 07:00:08 +0000

Many companies continue to use bonus systems designed years ago without having adapted them to new legal requirements regarding equality, work-life balance, and non-discrimination. This situation can give rise to significant labor-related risks.

The implementation of performance-based variable compensation systems is an increasingly common practice among companies. These mechanisms help incentivize performance, retain talent, and align the organization’s interests with those of its employees.

However, designing these systems requires more than simply setting goals and establishing payout percentages. Experience shows that many internal policies contain criteria that can lead to labor disputes, especially when the calculation of incentives is affected by absences from work.

A recent ruling by the Supreme Court (SC), in its Decision No. 522/2026 of May 29, 2026, reiterates that employers’ freedom to design bonus systems has limits and that such systems must, in all cases, respect the principles of proportionality, equality, and non-discrimination.

The company may link the bonus to the time worked

As a general principle, it is perfectly valid for variable compensation to be calculated based on the time worked.

However, this approach requires that there be a genuine proportionality between the period of service and the established objectives. It does not seem reasonable to demand the same level of results from someone who has worked the entire fiscal year as from someone who has been absent for several months.

Therefore, when the actual time worked decreases, the objectives or parameters used to measure performance must also be adjusted accordingly.

Incentive systems must clearly define how objectives are adjusted in the event of absence. A lack of proportionality may lead to wage claims. It is advisable to review the applicable calculation criteria annually.

Not all absences can be penalized

One of the issues that generates the most conflict is the use of absenteeism as a factor in adjusting variable compensation. Although a company may establish mechanisms to control absenteeism, not all absences can be treated the same way. Certain situations are subject to enhanced protection and should not result in negative financial consequences for the employee.

Absences resulting from temporary disability, as well as those related to work-life balance and family care rights, require particularly careful analysis. Case law has consistently warned that improper handling of these situations can lead to discrimination.

Medical leaves cannot always be counted toward reducing incentives. Leave related to work-life balance requires special protection. Generic clauses regarding absenteeism should undergo legal review.

Work-Life Balance and Equality: Increasingly Important Issues

Current regulations provide growing protection for the right to achieve a balance between family and work life.

For this reason, compensation policies must also be analyzed from the perspective of equality and non-discrimination. A system that appears neutral may have adverse effects on certain groups and ultimately be challenged in court.

It should not be forgotten that discrimination can be both direct and indirect. At times, certain internal rules end up harming employees who exercise legally protected rights, even if that was not the company’s initial intention.

Avoiding Double Penalties

Another particularly sensitive issue is ensuring that the same negative circumstance is not counted twice.

For example, if the company already adjusts the incentive based on actual hours worked, applying a second, additional reduction for that same absence could be disproportionate.

The accumulation of penalties significantly increases the risk of conflict and may call into question the validity of the incentive system. It is precisely this issue that was recently analyzed by the Supreme Court in a ruling that declared a specific variable compensation system to be unlawful.

Counting the same absence twice must be avoided. Excessively complex systems tend to generate more litigation. Transparency in the calculation of bonuses is essential.

The company cannot automatically reduce the bonus or variable compensation simply because the employee was on sick leave. The Supreme Court notes that absences due to illness cannot be counted as absenteeism to penalize variable compensation when doing so constitutes discriminatory treatment. In such cases, reducing the incentive because an employee was on sick leave may violate the prohibition against discrimination set forth in Law 15/2022 and Article 14 of the Constitution.

Has it been years since you last reviewed your bonus policy?

Many companies continue to use incentive systems designed years ago, without having adapted them to regulatory changes or evolving case law. However, the current legal framework requires that these policies be reviewed periodically to ensure they remain valid and comply with requirements regarding equality, work-life balance, and non-discrimination.

If your company has variable compensation systems linked to objectives, attendance, productivity, or absenteeism, it is advisable to conduct a comprehensive legal review of their design and operation.

For more information, please contact our Labor Advisory Service.

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Deferred sales, subsidies, and unpaid loans: How are they reported on your income tax return?

gremicat — Wed, 26 Aug 2026 07:00:42 +0000

Selling a property and receiving payment in installments, receiving a government grant, or writing off a loan that was never repaid are situations that are more common than they seem. What many people don’t realize is that each of these situations has its own rules under the personal income tax system, and filing a return in the wrong tax year can lead to problems with the tax authorities.

With personal income tax, it’s not just what you report that matters, but also
when you report it. Deferred sales, certain types of government assistance, and
unpaid loans are subject to specific rules for tax allocation that you should be
aware of to avoid mistakes and future tax adjustments.

When Should a Capital Gain Actually Be Reported?

The general rule seems straightforward. If there is a change in net worth, the
gain or loss must be reported in the tax year in which that change occurs.
However, practice shows that there are numerous exceptions and that a wrong
decision can have significant tax consequences.

For this reason, before filing your tax return, it is advisable to review certain
transactions that, even if they took place in a specific year, may be treated
differently from a timing perspective.

The date of the transaction does not always coincide with the time at which it
must be included in your income tax return.

Sales with deferred payments allow for some flexibility

One of the most common scenarios involves installment sales or deferred
payment transactions. Consider, for example, the sale of real estate or
corporate shares, where the proceeds are received in installments over several
years.

When more than one-year elapses between the transfer of the asset and the
due date of the final payment, the regulations allow you to choose to report the
gain as the various payments become due. This option can be a useful tool for
spreading out your tax liability and avoiding concentrating on the entire tax
burden in a single tax year. However, this option must be properly applied on
the corresponding tax return.

If you have sold an asset and will receive payment over several years, check
whether it is in your best interest to apply the deferred payments rule before
filing your income tax return.

Government Grants

There is a widespread perception that government grants or subsidies have no
tax implications. The reality is quite different.

As a rule, these grants generate a capital gain and must be reported in the tax
year in which they are received. However, certain grants allow the tax liability
to be spread over four tax years. This applies to certain grants for repairs to
one’s primary residence, certain grants related to historic heritage, or certain
incentives for young farmers.

The difference can be significant, especially when the amounts received are
large.

Receiving a grant does not mean it is tax-exempt. Before filing your tax return,
it is advisable to determine whether it is possible to spread out the taxable
income over multiple years.

Unpaid debts also have tax implications

Another common situation involves those who have lent money or have
outstanding receivables that ultimately prove uncollectible. It is not enough
simply to feel that the money will not be recovered. For the capital loss to be
claimed, certain legally prescribed circumstances must be met.

These include the approval of debt write-offs in certain restructuring
proceedings, the conclusion of bankruptcy proceedings, or the passage of one
year from the filing of certain legal claims without the debt having been paid.
Furthermore, if all or part of the amount is subsequently recovered, the
corresponding capital gain must be reported.

Not all unpaid debts automatically result in a deductible tax loss.

Changes in residence require prior review

Moving your tax residence outside of Spain requires a careful review to
determine whether there is any income that has not yet been reported. Such
income must be included in your final personal income tax return as a resident
taxpayer. However, when the move is to another European Union member
state, there may be alternatives that allow for deferral of that taxation. Given
that these situations are often accompanied by significant financial
implications, it is highly recommended to seek advice in advance.

Changing your tax residence without proper planning can result in unexpected
tax obligations.

Death Also Affects Pending Income

In the event of the taxpayer’s death, all income that has not yet been reported
must be included in the last tax return that is required to be filed. This aspect is
often overlooked in many probate proceedings, where attention is focused
exclusively on Inheritance Tax. However, properly reviewing the pending tax
situation can prevent future issues for the heirs.

Reviewing outstanding income tax obligations should be part of the estate
planning process.

A timely review prevents future problems

Capital gains and losses are one of the areas that generate the most errors in
income tax returns. In many cases, this is not due to any intent to violate the
law, but rather because the rules for timing the recognition of gains and losses
are complex and counterintuitive.

A deferred sale, a grant received several years ago, or a loan that ultimately
becomes uncollectible can affect the outcome of the tax return and lead to
subsequent adjustments.

Therefore, before filing your income tax return, it is advisable to review all
extraordinary transactions carried out during the tax year or pending from
prior years.

Sometimes, the difference between filing your taxes correctly and incurring an
unnecessary cost lies not in the amount of the transaction, but in choosing the right time to report it.

For more information, please contact our tax advisory service.

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Contractor Changes and Corporate Responsibility

gremicat — Wed, 19 Aug 2026 07:00:29 +0000

In sectors such as security, cleaning, maintenance, and support services, changes in contractors are common. However, improper management of the subrogation process can lead to unexpected wage claims and significant financial liabilities. Signing a new contract does not always mean starting from scratch. Under certain circumstances, the incoming company may be required to assume liability for labor-related debts incurred by the previous company.

For many service companies, being awarded a new contract represents a tremendous opportunity for growth. However, significant labor risks may lie hidden behind the signing of a new contract—risks that sometimes go unnoticed until a legal claim is filed. This is especially true in labor-intensive industries, where service continuity is often accompanied by the transfer of employees. Private security, cleaning, maintenance, support staff, institutional food services, and certain outsourced services are some common examples.

The question that frequently arises is simple: Is the company taking over the service also liable for the outgoing company’s outstanding labor-related debts? The answer is not always clear.

Subrogation is not merely a matter of taking on workers

In many sectors, the collective bargaining agreement requires the new contractor to take on some or all the workforce assigned to the service. The purpose is to preserve job stability and prevent each change in contractor from resulting in the automatic loss of a job. However, practical experience shows that not all subrogation processes proceed smoothly.

Sometimes there are disagreements regarding which employees should be taken on, what seniority should be recognized, what documentation must be provided, outstanding wage arrears, or which responsibilities fall to each company.

Accepting a contract without first reviewing the outgoing company’s employment records can lead to significant financial liabilities.

It is not always enough to simply assert that the previous company is liable

Traditionally, many companies believe that if the collective bargaining agreement imposed certain obligations on the outgoing company, the new contractor was automatically exempt from any prior claims. However, developments in case law are strengthening the protection of workers in certain cases, especially when the business relies primarily on its workforce and there is significant continuity in the workforce.

In these scenarios, the courts may find that a genuine business succession has occurred, with the consequences set forth in Article 44 of the Workers’ Statute (ET).

The successor company could be held jointly and severally liable for certain prior wage debts, even if it did not directly incur them.

Example. Let’s imagine an auxiliary services company that takes over the management of a logistics center. The previous contractor had 42 employees assigned to the service. The new contractor hires 35 employees and maintains the same operational structure. Months later, several employees claim unpaid wages, bonuses, and wage differences accrued during the previous company’s tenure, totaling 74,500 euros. The incoming company maintains that these amounts are the sole responsibility of the previous contractor. However, if it is determined that a business succession has occurred under the terms of Article 44 of the Workers’ Statute (ET), both companies could be jointly and severally liable for these amounts. The financial consequences could be very significant.

A preliminary analysis of the number of affected employees, the functions assumed, and the organization of the service is essential before formalizing the subrogation.

The burden of proof is becoming increasingly important

One of the issues giving rise to the most litigation is determining who must prove which workers have been taken on by the new company. The most recent judicial trend holds that, when a collective bargaining agreement mandates subrogation and the business is primarily labor-intensive, it is particularly incumbent upon the incoming company to provide documentary evidence of the actual scope of the workers’ transfer.

The reason is simple: the new contractor is typically the one that has the necessary information to prove:

How many workers it has taken on.
What duties do they perform.
Which employees have not been transferred.
The reasons for their non-transfer.

The lack of sufficient documentation can make it difficult for the company to defend itself in the event of legal proceedings.

What documentation should be reviewed before taking on a contract?

Before accepting a new contract, it is advisable to analyze at least the following aspects:

A complete list of assigned employees.
Length of service and salary conditions.
Applicable collective bargaining agreement.
Existence of pending legal proceedings.
Wage or Social Security debts.
Accrued and outstanding vacation time.
Situations involving temporary disability, reduced work hours, or leaves of absence.
Documentation required by the sector-specific collective bargaining agreement.

Proper preventive labor due diligence can prevent future conflicts and facilitate a smooth transition of services.

Does your company regularly take over or lose contracts?

If your organization operates in sectors where there are frequent changes in the contractor, it is advisable to periodically review your internal subrogation protocols.

Proper legal planning before taking over the new service allows you to:

Reduce financial risks.
Minimize litigation.
Ensure compliance with contractual obligations.
Properly document the succession.
Protect the company’s position against future claims.

Because, when it comes to contract succession, the decisions made during the first few days often determine the outcome of any subsequent legal proceedings.

For more information, please contact our Labor Department.

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Payroll error resulting in deductions from future paychecks

gremicat — Wed, 12 Aug 2026 07:00:56 +0000

Payroll errors occur more frequently than one might think. A duplicate bonus, incorrectly calculated overtime, or a computer glitch can result in an employee being paid more than they are owed. The question arises immediately afterward: Can the company recover that money by deducting it from the next paycheck?

Overpaying does not mean the company can automatically deduct that amount from the next paycheck.

The Most Common Errors

Although each case has its own particularities, overpayments usually result from common issues.

Among them are:

errors in calculating overtime;
double payments of incentives, per diems, or supplements;
employee terminations reported after the deadline;
incorrect updates to pay scales;
incorrect calculation of vacation pays or special payments;
issues with payroll software;
incorrect application of the collective bargaining agreement.

In most cases, the error is not the result of intentional action but rather simple administrative glitches.

Note: The sooner the error is detected, the easier it is to correct.

When Can an Amount Be Deducted Directly from Pay?

The company has the right to recover amounts paid in error. However, this does not mean it can always do so through a unilateral deduction. The key is determining whether the debt meets a series of requirements.

The deduction may be made when the amount is clearly identifiable, precisely determined, due and payable, and, above all, there is no dispute regarding its existence. In other words, both parties must agree that overpayment occurred.

Note: If the employee disputes the origin or amount of the debt, the company should not make the deduction unilaterally.

The Supreme Court Clarifies When This Is Possible

This very issue has been analyzed by the Supreme Court (Supreme Court Ruling No. 449/2025, dated May 21). The case stemmed from a company that, as a result of an error in its payroll system, paid certain employees more than they were entitled to following a subrogation process. When it detected the error, the company informed the workforce that the amounts would recover gradually, spreading the deductions over ten monthly installments. The employees’ representatives challenged the measure, arguing that the company needed a prior court ruling to make those deductions.

However, both the National Court and, subsequently, the Supreme Court ruled that the company’s actions were proper because no one disputed that the payment had been improper or the exact amount that was to be repaid.

The debt was clear, liquid, due, and enforceable; therefore, the adjustment could be made directly through payroll deductions.

What if the employee disagrees?

The situation changes completely. Let’s now suppose that the employee believes he or she was entitled to that bonus because he or she believes they met the established goals or because they disagree with the company’s interpretation. At that point, a dispute has arisen. The debt is no longer undisputed, and the company should not unilaterally deduct those amounts from the paycheck. The proper course of action would be to seek reimbursement through the appropriate legal channels so that a judge can determine whether the employee is entitled to a refund.

Please note: If there is any dispute regarding the debt, the unilateral discount may be declared invalid.

For more information, consult an employment law advisor.

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International Sales: Payment Collection

gremicat — Wed, 05 Aug 2026 07:00:00 +0000

When the buyer and seller are in different countries, trust alone is not always enough. A letter of credit allows a bank to act as an intermediary in the transaction and makes payment contingent upon the exact presentation of the agreed-upon documents.

Selling or buying goods in another country involves risks that do not always arise in
a domestic transaction. Distance, legal differences, transportation, and the difficulty
of collecting a debt abroad can turn a profitable transaction into a collection problem.

A documentary credit (also known as a letter of credit) is one of the most widely
used instruments for enhancing security in international trade.

It operates on a simple principle: the bank agrees to make payment when the
exporter submits, within the specified timeframe and under the established
conditions, the documentation required by the credit itself. It does not, on its own,
guarantee that the goods are flawless. What it does guarantee is that payment will
be made if the documents submitted strictly comply with the terms agreed upon.

What is a letter of credit?

A letter of credit is a payment order issued by the importer’s bank in favor of the
exporter. The importer asks his or her financial institution to open the letter of credit
and specify the conditions that the foreign supplier must meet. The bank will notify
the exporter of the transaction, usually through an institution located in the
exporter’s country. Once the goods have been shipped, the exporter submits the
required documents. If they are complete and contain no discrepancies, the bank
will proceed with payment according to the agreed terms.

The bank thus plays a central role. The exporter is not solely dependent on the
importer’s willingness to pay, and the importer knows that payment will only be
made if the correct shipment is documented.

How does the transaction work?

The first step is for the buyer and seller to agree on the terms of the international
sale. They must establish the price, the goods, the payment terms, transportation,
the place of delivery, insurance, and the documents required to prove compliance.

Next, the importer asks its bank to open a letter of credit in favor of the exporter. The
bank assesses the risk of the transaction and, if it approves it, issues the letter of
credit. A bank in the exporter’s country notifies the beneficiary of the letter of credit’s
issuance and its terms.

The exporter reviews the terms and, if they match what was negotiated, proceeds to
ship the goods. The exporter then submits the required documentation to their bank.

If the documents are in order, payment is processed and the documents are
forwarded to the importer’s bank so that the importer can take possession of the
goods.

The documentation determines the collection

In this type of transaction, documentation is not merely an administrative formality. It
is the key to receiving payment. Among the most common documents are the
commercial invoice, the bill of lading, the packing list, the certificate of origin, the
insurance policy, health certificates, and inspection documents.

The credit must specify precisely which documents are required, who must issue
them, what information they must contain, and by what deadline they must be
submitted.

An incorrect date, a description that does not match the text exactly, or a missing
signature can result in a documentary discrepancy and delay or prevent payment.

Physical Inspection Protects the Importer

The bank verifies the documents but does not open containers or check the actual
quality of the goods. For this reason, the importer may include among the
requirements a physical inspection certificate issued prior to shipment. The
inspection may be conducted by the buyer, a trusted individual, or an independent
specialized company.

This certificate verifies aspects such as the quantity, condition, quality, packaging,
and technical characteristics of the product.

For high-value transactions or those involving sensitive goods, including a pre-
shipment inspection can prevent problems that are difficult to resolve once the
shipment has already arrived in the destination country.

Revocable and Irrevocable Letters of Credit

A revocable letter of credit can be modified or canceled prior to payment without the
beneficiary’s consent. This type of letter of credit offers very little security to the
exporter and, in practice, is used only to a limited extent.

In contrast, an irrevocable letter of credit cannot be canceled or modified unilaterally
once issued. Any changes require the consent of the affected parties.

For this reason, the irrevocable letter of credit is the standard option when the goal
is to provide the foreign supplier with a real guarantee of payment.

Confirmed and Unconfirmed Letters of Credit

In an unconfirmed letter of credit, the primary payment obligation rests with the
issuing bank, which is typically the importer’s bank. The advising bank notifies the
exporter of the opening and may handle the processing of the documents but does
not necessarily provide its own payment guarantee.

In a confirmed letter of credit, another bank adds its commitment to that of the
issuing bank.

This confirmation can be particularly advantageous when there are doubts about the
issuing bank’s solvency, the stability of the buyer’s country, or the ability to transfer
funds abroad.

Payment at Sight or Deferred Payment

In a sight letter of credit, the exporter receives payment once they present compliant
documents and the bank completes its review. In a deferred payment letter of credit,
payment is made later. The due date can be calculated from the date of shipment,
the presentation of documents, or any other agreed-upon time.

This second type allows the importer to obtain a period of trade financing, while the
exporter can explore the possibility of receiving payment in advance through their
financial institution.

Divisible Credits and Open Lines of Credit

A divisible credit allows for partial drawings as different shipments are made. This
option is useful when goods are delivered in batches or on a staggered basis.
Revolving credits or open lines of credit can also be established, which are renewed
within a specified limit and for a set period.

These structures facilitate ongoing commercial relationships, although they require
rigorous monitoring of the amounts drawn, due dates, and documentation
corresponding to each shipment.

Transferable credits and transactions with intermediaries

A transferable credit allows the initial beneficiary to request that all or part of the
credit amount be made available to another beneficiary. It is typically used when the
exporter acts as an intermediary and needs to pay one or more suppliers. For this
option to be available, the credit must expressly provide for it. It is not sufficient for
the parties to have discussed it informally.

Another structure used by intermediaries is the back-to-back credit. In this
arrangement, the beneficiary of an initial credit uses that backing to open a second
credit in favor of their supplier.

Advance-Payment Credits and Revolving Credits

Some credits allow the exporter to receive a portion of the funds before submitting
all the documentation. In credits with a “red clause,” the advance payment may be
made against a receipt or a specific guarantee. When there is a “green clause,” the
beneficiary must also provide proof of the availability or storage of the goods.

Revolving credits allow the amount to be reused over a period, in accordance with
the established terms. They are common in recurring business relationships
involving multiple similar shipments.

For more information, please contact our tax advisory service.

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Summer Opening Hours 2026

gremicat — Fri, 31 Jul 2026 07:00:53 +0000

We’re adapting to summer… but we’re still here for you.

As every year, with the arrival of summer, at Gremicat we are adjusting our opening hours so that we can also enjoy this special time of year.

However, we want you to know that we will continue working for you, maintaining our commitment and providing all our services without interruption.

From 3 August to 31 August, our opening hours will be exclusively from 9:00 a.m. to 2:00 p.m. During this period, our team will continue to support you with anything you may need, with the same dedication as always.

We would also like to take this opportunity to wish you a wonderful summer, filled with rest, time to switch off and many happy moments.

Thank you for continuing to place your trust in Gremicat!

The GREMICAT, S.L. team

The tax authorities cannot automatically deny deductible VAT for exceeding the company’s corporate purpose

gremicat — Wed, 29 Jul 2026 07:00:31 +0000

Many companies engage in minor ancillary activities that were never explicitly included in their articles of incorporation. Until now, this could become a problem when the tax authorities review certain VAT deductions. The Supreme Court has just placed limits on this overly formalistic interpretation.

For years, during certain VAT audits, the tax authorities have maintained a rather rigid
stance. If an expense was not directly linked to the company’s main activity or its corporate purpose, the deduction of input VAT could be automatically denied. This led to some rather questionable situations.

For example, companies that carried out an additional economic activity—properly
invoiced and reported, with VAT charged and remitted—would later find that the tax
authorities denied their right to deduct the associated expenses simply because that
activity was not expressly listed in the articles of incorporation.

The practical consequence was peculiar. The company was required to pay the VAT on that activity but could not recover the VAT necessary to carry it out. And that is precisely where this new doctrine of the Supreme Court (SC) comes into play through its recent ruling of May 18, 2026.

It is important to review whether there are any secondary or complementary activities
that generate output VAT. Analyze whether the tax authorities have rejected deductions based solely on corporate purpose and verify any asset-related activities, leases, or ancillary operations within operating companies.

What matters for VAT purposes is not the corporate purpose.

The Supreme Court’s ruling emphasizes an idea that, although it seems obvious, was not always being applied correctly. From a VAT perspective, what matters is not what is written in the articles of incorporation, but the actual existence of an economic activity.

In other words, if a company organizes material or human resources to provide services, lease assets, or engage economically in the market, an economic activity exists for VAT purposes, even if that activity does not exactly match the wording of the corporate purpose.

The Supreme Court also notes that, unless proven otherwise, business corporations are considered business owners or professionals for tax purposes. Therefore, attempting to equate “corporate purpose” with “economic activity” amounts to conflating two distinct concepts.

One belongs to the commercial sphere. The other pertains to the technical operation of VAT. And they do not always coincide.

The corporate purpose may have commercial relevance, but it does not, by itself,
determine the right to deduct VAT. The economic reality and the activity actually carried out are of fundamental importance. It is advisable to properly document any
complementary activity that generates recurring income.

The principle of VAT neutrality is regaining prominence

The ruling also reinforces one of the essential principles of VAT, even though it is often obscured by legal provisions and formal requirements. Anyone who charges VAT on an economic activity must be able to deduct the VAT input associated with that same activity. That balance is precisely what maintains the tax’s neutrality.

The opposite would ultimately create a distorting effect. The business would act as a tax collector on behalf of the tax authorities, yet bear a tax burden that the system, in theory, does not intend for it to assume. That is why the Supreme Court holds that it makes no sense to require the collection of VAT derived from an activity while simultaneously preventing the deduction of the expenses necessary to carry out that activity.

The key lies not in the name of the activity, but in whether there is a genuine connection between the expenses incurred and the economic activity carried out.

Simply issuing invoices is not enough; there must be real and verifiable economic activity. The connection between expenses and revenue remains essential. Accounting records and supporting documentation continue to be decisive factors in an audit.

What might change from now on?

This ruling could have an impact on quite a few common situations. Companies that rent out real estate or parking spaces as a secondary activity. Operating companies that manage assets independently. Family-owned entities that engage in parallel activities not initially provided for in their articles of incorporation. Even certain leases or asset management arrangements that the tax authorities had been challenging almost automatically.

That said, the ruling does not mean that every expense will be deductible. The Court does not eliminate the standard VAT requirements. It remains necessary to prove:

That a genuine economic activity exists
That VAT is charged
That the expense is related to that activity
And that the transaction is not for private use or unrelated to the business activity

The difference is that now the mere fact that an expense does not align with the corporate purpose can no longer be used, on its own, as a definitive argument to deny the deduction.

Review past tax adjustments where VAT was denied due to a lack of connection with
corporate purpose. Analyze possible lines of defense in ongoing proceedings. Assess
whether certain ancillary activities should also be reflected in the articles of
incorporation as a matter of sound business judgment.

For more information, please contact our tax advisory service.

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