Spain

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

Royal Decree-Law 10/2024

Royal Decree-Law 10/2024, passed on 23 December 2024, establishing a temporary energy tax in 2025, was published in the Spanish Official Gazette on 24 December 2024.

The Royal Decree-Law was not ratified by Parliament, and its repeal was agreed during its sitting of 22 January 2025.

Royal Decree-Law 9/2024

Royal Decree-Law 9/2024, adopting urgent measures in economic, tax, transport, and social security matters, and extending certain measures to address situations of social vulnerability, was approved on 23 December 2024 and published in the Spanish Official Gazette on 24 December 2024.

The Royal Decree-Law was not ratified by Parliament, and its repeal was agreed during its sitting of 22 January 2025.

Law 7/2024

On 21 December 2024, Law 7/2024, passed on 20 December 2024, which establishes three taxes and amends various tax rules, was published in the Spanish Official Gazette.

The main new features contained in this Law that affect corporations are the following:

Establishment of three new taxes

Top-Up Tax

The Top-Up Tax to guarantee a minimum global level of taxation for multinational groups and large national groups is the subject of this law, its inclusion obeying the need to transpose into Spanish law Council Directive (EU) 2022/2523 (Pillar Two) with effect for tax periods beginning on or after 31 December 2023, except for certain provisions that will take effect in the tax periods beginning one year later.

See Global minimum tax in the Taxes on corporate income section for details.

Tax on interest and commission margins

The tax on interest and commission margins replaces the temporary tax on credit institutions and financial credit establishments with effect for tax periods that begin on or after 1 January 2024, although the tax will be accrued on the day after the end of the tax period. It is a direct tax that will be applied throughout the Spanish territory, without prejudice to the regional regimes of Concert and Convention, as well as to the provisions of the international treaties and conventions that form part of the internal legal system.

Tax on liquids for electronic cigarettes and other tobacco-related products

The tax on liquids for electronic cigarettes and other tobacco-related products is a special manufacturing tax that falls on the consumption of various products, applying throughout the Spanish territory, except the Canary Islands, Ceuta, and Melilla, with effect from 1 January 2025.

Amendments to Corporate Income Tax (CIT) Act

Non-deductible expenses

In the same way as those derived from the accounting of CIT, the expenses derived from the accounting of the complementary tax will not be deductible, nor will the income derived from its accounting be subject to the tax. Additionally, the new tax on interest and commission margins of certain credit institutions will not be considered a deductible expense.

Capitalisation reserve

With effect for tax periods beginning on or after 1 January 2025, the regulations on the capitalisation reserve are amended to enhance this incentive:

• Thus, the reduction in the tax base for the capitalisation reserve is generally increased from 15% to 20% of the equity increase.
• Notwithstanding the foregoing, the percentage of reduction is linked to the workforce increase. Thus, the amount of this reduction depends on the increase in the taxpayer's average staff compared to the immediately preceding tax period. In this sense, the reduction will amount to:
• 23% of the equity increase when the workforce increase has been at least 2% without exceeding 5%.
• 5% of the equity increase when the workforce increase is between 5% and 10%.
• 30% of the equity increase when the workforce increase exceeds 30%.

The workforce increase must be maintained for a period of three years from the end of the tax period to which this reduction corresponds.

A limit is established to the reduction in the tax base as a capitalisation reserve which may not exceed 20% of the positive tax base of the tax period prior to: (i) this reduction, (ii) the integration of provisions for impairment of credits or other assets arising from possible insolvencies, and (iii) the offset of carryforward tax losses (25% for taxpayers whose net turnover during the 12 months prior to the date on which the tax period to which this reduction corresponds begins is less than 1 million euros [EUR]).

Gradual reduction in the tax rate for small and medium size entities (SMEs) and micro-enterprises

With effect for tax periods starting on or after 1 January 2025, a reduction in the tax rate applicable to SMEs and to micro-enterprises (those with a net turnover in the previous tax period of less than EUR 1 million) is envisaged, although its implementation is expected to be carried out progressively, over a period of three years for micro-enterprises and five years for SMEs. In addition, in the case of micro-enterprises, the tax rate is broken down into two brackets, with a lower rate being levied on the taxable income up to EUR 50,000, when the tax period is one year, or up to the corresponding proportional amount, when the tax period is shorter. Specifically, the tax rates would be as follows:

The above reduced rates will not apply to entities qualified as property-holding entities.

Tax-protected cooperative entities will be taxed at the tax rates resulting from reducing the previous tax rates by three percentage points, provided that the resulting rate does not exceed 20%, except for non-cooperative results. 

As a result of these amendments in the tax rates, the regulation regarding minimum taxation is also amended to adapt the minimum net tax rate for micro-enterprises and small companies to the reduction in tax rates set out above.

Recovery of the limits for large companies declared unconstitutional by the Spanish Constitutional Court

With effect for tax periods starting on or after 1 January 2024 and that have not ended before 22 December 2024 (date of entry into force of Law 7/2024), the limits introduced for large companies by Royal Decree Law 3/2016 declared unconstitutional due to formal reasons by the Spanish Constitutional Court's Judgement issued 24 January 2024 are recovered.

For these purposes, large companies are those whose net turnover during the 12 months prior to the date on which the tax period begins is at least EUR 20 million.

 The limits now recovered for large companies are those referring to the following items:

• Compensation of carryforward tax losses and deferred tax assets derived from provisions for impairment of credits or other assets arising from possible insolvencies of debtors not related to the taxpayer (both in individual and tax grouping regime). 

The limits for its compensation will be reduced to:

• 50% if net turnover in the 12 months before the date in which the tax period starts was at least EUR 20 million but less than EUR 60 million.
• 25% if, in such period, the net turnover was at least 60 million.

• Application of tax credits for the avoidance of international double taxation.

The joint limit will be 50% of the taxpayer's gross tax liability.

Reversal of tax impairment on securities

The Spanish Constitutional Court's Judgement of 24 January 2024 declared unconstitutional the obligation to automatically reverse in fifths and during tax years 2016 to 2020 the impairment losses on securities that were considered deductible in tax periods beginning before 1 January 2013.

In this regard, a new rule is introduced according to which the reversal in the tax base of such impairment losses must be carried out in thirds in the tax years 2024 to 2026.

However, with respect to the income corresponding to this reversal of impairment losses integrated into the tax base by application of the provisions established here, the more restrictive limits for the offsetting of negative tax bases in large companies will not apply.

Extension of the limit to the offsetting of carryforward tax losses within the tax consolidation group to tax periods starting in 2024 and 2025

Law 7/2024 extends to tax periods beginning in 2024 (provided they did not end before 22 December 2024) and 2025 the restriction that already existed in 2023 for groups that pay taxes under the tax consolidation regime, by not allowing them to include in the group's consolidated tax base 50% of the individual carryforward tax losses of the entities that make up said group.

All of this, without prejudice to the fact that those amounts that cannot be computed in 2024 and 2025, will be integrated in equal parts in the first ten tax periods beginning on or after 1 January 2025 and 1 January 2026, respectively, in similar terms to those established for 2023 tax-loss carryforwards.

However, considering that this measure significantly harmed foundations that, being subject to the general corporate tax regime, were part of tax groups, it has been provided that this limitation will not apply to them in the tax periods beginning in 2024 and 2025.

Amendments to Value-added Tax (VAT) Act

• The VAT rate on fermented milk is reduced to 4% as of 22 December 2024.
• Several measures are introduced to combat VAT fraud detected in relation to certain products in the hydrocarbons sector, among which the following should be highlighted:
  • The completion of the non-customs deposit regime is understood to be carried out, in any case, by the last depositor of the product to be extracted from the tax warehouse, or by the owner of the warehouse, when one is the owner of the product.
  • New obligations are imposed on whoever completes this regime, in relation to Form 303, and must
    • prove that one is an authorised operator or a reliable operator, or
    • guarantee the payment of VAT on the subsequent subject and non-exempt delivery by means of a guarantee from a credit institution, financial institution, or insurance company, or by payment on account of the corresponding VAT.
  • The joint liability of the owner of a customs warehouse who allows fuel to leave the warehouse without meeting the requirements specified above is regulated.
• The government is expected to promote the modification of the harmonised VAT Directive to allow Member States to tax short-term housing rentals in areas where this type of accommodation makes it difficult for citizens to access housing or promotes tourist saturation of the territory. 

Measures to Promote the Information Society

Law 56/2007, of 28 December 2007, on Measures to Promote the Information Society is amended to include the development and management by the State Tax Administration Agency of a public electronic invoicing solution, which shall provide electronic invoicing services to those business owners or professionals who so choose and shall serve as a universal and mandatory repository for all electronic invoices issued, sent, or received.

Royal Decree Law 6/2024 to alleviate the effects of the DANA flood

Royal Decree Law 6/2024, of urgent measures to alleviate the effects of the DANA flood that has affected large areas of the Peninsula and the Balearic Islands between 28 October 2024 and 4 November 2024, was passed on 5 November 2024 and published in the Spanish Official Gazette on 6 November 2024.

The main tax measures included that affect corporate taxation are the following:

• Direct aid granted to self-employed workers and companies. In the case of companies, the amount of this aid will depend on the volume of operations in the 2023 financial year; and, in the case of entrepreneurs or professionals who are natural persons, the amount of the aid will be EUR 5,000.
• Extension until 30 January 2025 of the tax deadlines for filing tax returns and self-assessments and for tax procedures with due dates in November and December 2024.
• Deferrals and instalments are facilitated without late payment interest charges during the first six months.
• Exemptions from the property tax and the economic activities tax for the year 2024.

Other measures to alleviate the effects of the DANA flood have been incorporated in Royal Decree Laws 7/2024 and 8/2024, although they are more focused on individuals.

Royal Decree Law 4/2024

Royal Decree Law 4/2024, which extends certain measures to address the economic and social consequences of the conflicts in Ukraine and the Middle East, and through which urgent tax, energy, and social measures are adopted, was passed on 26 June 2024 and published in the Spanish Official Gazette on 27 June 2024. The main tax measures included that affect corporate taxation are the following:

• The CIT accelerated depreciation incentive provided for investments in new vehicles classified as FCV, FCHV, BEV, REEV, or PHEV and new charging infrastructures for electric vehicles used for business purposes that come into operation in the tax periods starting in 2024 and 2025 is replaced by a free depreciation incentive.
• The CIT capitalisation reserve incentive is modified for tax periods starting from 1 January 2024. In this regard, the reduction percentage is increased from 10% to 15% and the equity maintenance period and the period during which the reserve may not be distributed is reduced from five to three years, with a transitional scheme according to which the three-year period will also be applicable to the incentives whose maintenance period has not expired.
• The tax incentives established in the Municipal Real Estate Tax and the Business Activity Tax for the Island of La Palma are extended during 2024.
• As regards VAT, the reduced rates of 5% (and 0.62% sales equalisation tax) on seed oils and pasta and 0% on certain staple foods are extended until 30 September 2024. From 1 October 2024 until 31 December 2024, the rates will be increased to 7.5% (and 1% sales equalisation tax) on seed oils and pasta and 2% on certain staple foods (and 0.26% sales equalisation tax).
• From 1 January 2025 and without a time limit, the 4% VAT reduced rate will be applicable to olive oil.

Constitutional Court judgement 11/2024, on Royal Decree-Law 3/2016

Spain’s Constitutional Court judgement 11/2024, of 18 January 2024, published in the Official State Gazette on 20 February 2024, upholds the question of unconstitutionality number 2577-2023, that declares void and unconstitutional certain provisions of Law 27/2014, of 27 November 2014, on corporate tax, incorporated through article 3.1, sections One and Two, of Royal Decree-Law 3/2016, of 2 December 2016 (RDL 3/2016). In particular, the measures that have been declared void and unconstitutional are the following:

• The introduction of more severe maximum offset limits for tax- loss carryforwards for taxpayers whose net turnover in the 12 months before the start of the financial year exceeds EUR 20 million
• The introduction for the same taxpayers of an additional limit to the application of tax credits for the avoidance of double taxation, both international and internal, as a result of which the sum of both tax credits could not exceed 50% of the taxpayer's gross tax liability.
• The obligation of all taxpayers to automatically include a minimum annual reversal of the impairment of shares previously deducted into the fiscal year 2016 to 2020 CIT base.

However, this judgement does not have full retroactive effects. Therefore, the tax liabilities accrued for CIT purposes that have been definitively determined by a final judgement with res judicata effect or a definitive administrative decision, the assessments that have not been contested, and the self-assessments whose rectification has not been requested at the date of the judgement cannot be reviewed. This means that only companies that have appealed the assessments or requested rectification of the self-assessments before the publication of the judgement in the Spanish Official Gazette will be able to benefit from the repeal the Royal Decree-Law.

Although a Royal Decree-Law can be used to establish, modify, or repeal taxes in emergency situations, the Constitutional Court understands that Royal Decree-Law 3/2016 exceeds the material limit provided for Royal Decree-Laws on tax matters, affecting the duty to contribute to the funding of public expenditure. According to the Constitutional Court, the amendments introduced alter essential elements of CIT, such as the tax base and the amount payable, affect the determination of the tax burden, and have a notable impact on a basic part of the tax system, affecting the essence of the CIT payers’ duty to contribute. Furthermore, the Court recalled that the Royal Decree-Law in question is connected to Royal Decree-Law 2/2016, which was already declared unconstitutional for the same reason by the Court’s judgement 78/2020, and which increased payments on account of CIT of large companies.