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Spain: Spanish corporate income tax hike: New measures


Gonzalo Gallardo

At the end of 2016, a provision appeared in Royal Decree-law 3/2016 of December 3, introducing important changes to the Corporate Income Tax Law. Prior to that, Royal Decree-law 2/2016 of September 30 2016, had amended the prepayment system relating to this tax, establishing a minimum advance payment based on the income per books rather than the tax base. Both of those provisions are aimed at reducing the public deficit by immediately increasing the amount collected for corporate income tax, and mainly affect companies with high revenues and multinationals operating in Spain (large enterprises). In this commentary, we will highlight the three most relevant changes brought in by the new provision.

Firstly, for fiscal years starting on or after January 1 2016, regulations on the use of tax assets (tax losses and tax credits for the avoidance of national and international double taxation) have been made stricter for large enterprises by raising the percentage limits on the tax base and establishing new limits on tax payable.

Consequently, even where there are sufficient tax credits available, if the tax base is positive, the tax settlement will always result in an amount payable. In practice, this gives rise to a deferral in the use of those tax credits (as there is no deadline for using them) which, apart from the financial effect of bringing forward the payment of taxes, has an important accounting impact if the use of tax credits is delayed beyond the period accepted for their capitalisation for accounting purposes.

Secondly, for fiscal years starting on or after January 1 2017, taxpayers can no longer deduct the losses incurred on the transfer of holdings in companies that qualify for the exemption regime (qualifying holdings). That deduction is also not permitted in the case of foreign companies subject to low taxation, regardless of the percentage holding in their capital.

This is, in part, a consequence of the exemption method established some time ago for qualifying holdings in foreign companies and recently extended to Spanish companies. However, if the loss is incurred when the company is dissolved, it can be deducted, provided that it is not derived from a reorganisation operation or the company's activity continues. Thus, what this measure actually seeks is for the losses not to be recognised at the level of the shareholders during the lifetime of the company.

For holdings that do not meet these requirements (non-qualifying holdings in companies not located in low-taxation territories), the previous rules remain in force, so the losses continue to be deductible when the holdings are transferred to third parties or when the company is dissolved other than through a reorganisation operation covered by the tax neutrality regime.

Lastly, as from fiscal years starting on or after January 1 2016, all corporate income taxpayers are obliged to reverse on a straight-line basis over a period of five fiscal years, the impairment losses in respect of holdings in the capital of companies (resident in Spain or abroad) that have been deducted in past fiscal years (we remind you that taxpayers have not been permitted to deduct impairment losses on holdings since January 1 2013), without this being conditional on the recovery of the value of the investee. Thus, after the five-year period elapses, shareholders will not have deducted any impairment losses in respect of their holdings, and those losses will be tax deductible when the entity is transferred or dissolved according to the regime mentioned above.

Gonzalo Gallardo (, Madrid


Tel: +34 915145200


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