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Spain Corporate - Significant developments

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Over the past year, the following significant amendments have been made to Spanish law on the taxation of companies:

  • On 6 December 2016, Royal Decree 596/2016, of 2 December 2016, for the modernisation and improvement of the use of electronic means, was published in the Official State Gazette.

    As of 1 July 2017, this regulation introduces a new online information system wherein certain companies are obligated to notify the tax administration of their billing records in real time. Specifically, this new system, which represents a substantial change in value-added tax (VAT) management, is compulsory for those taxpayers obligated to submit their VAT returns (i.e. Form 303) on a monthly basis because: (i) they are large companies, (ii) they are included in the VAT Monthly Refund Register (REDEME), or (iii) they apply the VAT group regime.
  • On 3 December 2016, Royal Decree Law 3/2016, of 2 December 2016, adopting tax-related measures aimed at consolidating public finances and other urgent measures on social matters, was published in the Official State Gazette. The main measures contained in this law that affect company taxation are the following:
    • Limit on the offsetting of tax losses: For tax years commencing on or after 1 January 2016, the offsetting of prior-year tax losses will be subject to the following limits for large companies:
      • Companies with a net turnover of at least 60 million euros (EUR): 25% of their tax base.
      • Companies with a net turnover of at least EUR 20 million but less than EUR 60 million: 50% of their tax base.
    • Limit on the application of deductions for double taxation: For companies with a net turnover of at least EUR 20 million, a new limit of 50% of gross tax payable is established for the application of deductions for international or internal double taxation (generated or pending application). The limit will also be applicable in tax years commencing on or after 1 January 2016.
    • Reversal of impairment on shareholdings: For tax years commencing on or after 1 January 2016, impairment on shareholdings that was tax deductible in tax periods prior to 2013 should be reversed over a maximum of five years on a straight-line basis.
    • Non-deductibility of losses arising from the transfer of shareholdings in entities: With effect for years commencing on or after 1 January 2017, capital losses associated with the sale of shareholdings cease to have a tax effect when the dividends or positive income deriving from the transfer of such shareholdings have benefited from the exemption for double taxation or if they relate to entities located in tax havens or territories that do not reach a level of taxation of 10%.
    • With respect to excise duty, there is a 5% increase in the tax levied on the consumption of intermediary products and alcohol and derived beverages in both the Peninsula and Canary Islands. Likewise, the weight of the specific component in the tax on manufactured tobacco is increased with respect to the ad valorem component, and the minimum level of taxation increases both for cigarettes and fine-cut tobacco.
    • The deferral or payment in instalments of the following tax debts is eliminated as of 1 January 2017:
      • Debts resulting from the enforcement of non-appealable rulings disallowing, totally or in part, an appeal or economic-administrative claim, which were suspended during the processing of such appeals or claims.
      • Debts deriving from taxes that should be charged in accordance with applicable law, unless it may be duly evidenced that such taxes have not actually been paid.
      • Debts relating to tax obligations that must be met by the party required to make payments in instalments of corporate income tax (CIT).

      The above changes entered into force on 1 January 2017.

      Likewise, the exception envisaged in the General Tax Law in relation to the impossibility of deferring or paying in instalments tax debts relating to tax obligations that must be fulfilled by the withholder or party required to make interim payments is eliminated with effect from 1 January 2017.

      A transitional arrangement is established for all the above cases, under which deferrals or payments in instalments in respect of which proceedings were instigated before 1 January 2017 will be regulated by legislation in effect prior to such date until their completion.
    • With effect from 1 January 2017, payments in kind will not be allowed in respect of tax debts that have non-deferrable status in accordance with the provisions of Article 65.2 of the General Tax Law. In such cases, requests for payments in kind will be disallowed.
    • Cadastral values are updated through this Royal Decree Law so that the increase takes effect as regards property tax, a tax that accrues on 1 January. According to the Land Registry Law, the values should have been updated by the Budget Law. However, because of the delay in forming a government, it was impossible for the Bill to pass through Parliament before the end of the year.
  • Royal Decree Law 2/2016, introducing tax measures aimed at the reduction of public deficit, was approved and published in the Official State Gazette on 30 September 2016.

    According to this Law, applicable to financial years commencing from 1 January 2016, the payment on account rate applicable to companies whose net turnover for the 12 months prior to the date on which their tax period commences is at least EUR 10 million will be the result of multiplying their tax rate (rounded up) by 19/20, meaning that the rate applicable to companies that are taxed at the general tax rate will be 24%.

    In addition, for companies that exceed the EUR 10 million threshold, a minimum payment on account is established, which is 23% of the profits reported in their income statement of the financial year between the beginning of the tax period and the day prior to the beginning of every period for which a payment on account is made minus (solely) prior payments on account and certain types of income such as income generated from arrangements with creditors. For credit entities and companies of the hydrocarbon sector, the minimum payment on account will be 25%.

    These measures will be applicable from the payment on account to be made on October 2016.
  • On 28 June 2017, Law 3/2017, the General State Budget for 2017, was published in the Official State Gazette. The main measures contained in this law that affect companies taxes are:
    • For tax years commencing on or after 1 January 2017, the percentages and limits applicable to tax credits for investments in cinematographic productions, audio-visual series, and live performances of performing and musical arts have been increased
    • A reduction of the VAT applicable to live cultural events (e.g. theatres, circuses, bullfights, concerts). The rate applicable to services provided on or after 29 June 2017 will be 10% instead of 21%.

Last Reviewed - 21 December 2017

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