Astronaut and science minister Pedro Duque made an ’emergency’ appearance in Parliament earlier today (Thursday) after a Spanish tabloid revealed he had set up a dormant company to reduce taxes on a villa he and his wife had bought in Jávea (Alicante province).
The latest in a string of smears to hit Pedro Sánchez’s government, Okdiario referred back to the socialist president’s words during an interview in 2015 – that he would immediately cease any minister who was found to have used the limited company structure to halve their personal taxes.
But Duque told Parliament, and reporters allowed in, that he and his wife had largely set up the company so that the villa had someone to look after it as they spent most of their time abroad.
Consuelo Femenía, Duque’s wife, is Spanish ambassador in Malta, and Duque had been planning to move there to join her before he was nominated minister for science and universities.
The couple bought the villa on the La Corona urbanisation in the popular seaside town as a holiday home in 2005, right in the middle of the property boom and at a time when purchasing residential homes through a limited company was standard practice and considered legal.
He said he was advised to do so by his accountant, but that in reality, having the company had cost him ‘a huge amount of money’.
“I don’t think there was any real tax saving to be had by doing so,” he explained today.
Duque stressed that he had been ‘100% scrupulous’ and had never invoiced any income through the company which ‘corresponded to him as a person’.
Pedro’s and Consuelo’s house in Madrid, where he is now living most of the time, also showed up as company property, because he says it ‘made sense’ to have both of them registered as such – but that they already owned it when they set up the firm and bought the Jávea villa.
“I’ve spoken to the president about what he said in 2015, and he said I have his full support,” Duque stressed.
“I have no investigations open through the tax office, nor any demands or summons. We have an accountant who presents details of our finances and our tax returns faithfully, and we sign these off every year.”
By setting up the company, Pedro and Consuelo effectively rented the villa to themselves, but he refused a demand to show the documents since those are ‘company property’ and showing them in public would be ‘going too far’.
Duque admitted he always found speaking about his personal affairs difficult and, during the Q&A session at the end, requested that he be spared ‘personal questions’.
The tax authority was later asked for the ‘official’ line.
It confirmed Duque and Femenía were up to date with their taxes and that buying a home through a limited company was not in any way illegal.
The main difference by doing so this way is that the owners save income tax, but instead pay a tax on the catastral, or basic land value of the property.
Secretary-General for the tax office technicians department GESTHA, José María Molinedo, said he did not have sufficient data to hand to say whether the couple had saved much money, but that their actions were ‘a habitual practice’ among business owners and the self-employed where they want to ‘safeguard their personal assets’.
“The saving is pretty insignificant,” Molinedo reveals.
Chairman of the Spanish Association of Tax Accountants and Advisors (ASEFIGET), Adolfo Jiménez, says the process Duque and Femenía undertook is ‘legal’, but ‘you would need to ensure they had done it properly in tax terms, with the right paperwork’.
Concerning whether buying a house through a limited company and renting it to oneself is ‘illegal’, Jiménez said it would be ‘strange’ if the firm ‘had no business activity’, since it would need to have an income in order for the ‘self-rental’ to occur.
He said anyone concerned would be able to check with the mercantile registrar to see whether the firm was earning any money.
Jiménez said the only ‘illegality’ would be if the IVA on the villa had been offset against quarterly returns because IVA on a residential property is never deductible if it is going to be used for that purpose.
Duque was not asked about this during his appearance.
Jiménez thought it was ‘odd’ how Duque was not willing to show paperwork covering the ‘self-rental’, saying he, personally, would show whatever he was asked to provide if he had ‘nothing to hide’.
But Duque had already made it clear during his speech that he was normally a very private person.
Jiménez was asked what the difference was between Duque’s situation and that of author and TV presenter Màxim Huerta, who resigned after a week in the job when it was found he, too, had used the limited company set-up to save tax.
The association chairman said Huerta received all his earnings from his TV work via the company, meaning he was paying profit tax rather than income tax – a significantly lower amount than he should have been.
Duque does not plan to resign and Sánchez says he is an ‘excellent minister’ whom he wants to keep on the cabinet.