Spain

Automatic and standardised exchange of tax information agreements

The US Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to detect and prevent offshore tax evasion. Although, due to its name, it may seem that FATCA is for financial institutions, many global companies outside the financial services industry may be affected by FATCA if companies of their worldwide network fall under the purview of FATCA or have operational areas that make or receive payments subject to FATCA.

Multinational companies that are withholding agents are already required to report, withhold on payments, and record payees, but FATCA requires that changes be made to these activities. FATCA has established that multinational businesses should assess company payees differently, engage in withholding on certain gross proceeds transactions (a change from historic processes), and report other information to the US Internal Revenue Service (IRS).

The withholding provisions of FATCA came into effect on 1 July 2014. Compliance with FATCA may require changes to existing systems and processes across business units and regions, the renewal of policies and day-to-day practices, as well as other new tasks, such as registering with the IRS.

Spain and the United States have signed an intergovernmental agreement (IGA) aimed at improving compliance of international tax laws and enforcing FATCA. Under this agreement, financial institutions in Spain and the United States are required to provide their tax authorities with information on taxpayers from the other signatory country. This information will then be automatically exchanged between those tax authorities through a standardised procedure.

Multilateral Competent Authority Agreements

Multilateral agreement on the automatic exchange of information on income received through digital platforms

The multilateral agreement between competent authorities on the automatic exchange of information on income received through digital platforms was published in the Official State Gazette on 19 September 2023.

Before this agreement, Law 13/2023, of 24 May 2023, amended the General Tax Law by including a new Additional Provision that aims to establish a new information reporting and due diligence obligation in relation to the informative declaration of subject platform operators with respect to mutual assistance.

This newly published agreement aims to allow the exchange of information between different administrations regarding income from the provision of accommodation, transportation, and other personal services. In addition, it allows the exchange of information on income obtained from the sale of goods and lease of means of transportation arranged through digital platforms.

Multilateral agreement on the automatic exchange of information on the mechanisms for circumventing the common reporting and information standard for opaque offshore structures

The multilateral agreement between competent authorities on the automatic exchange of information on the mechanisms for circumventing the common reporting and information standard for opaque offshore structures was published in the Official State Gazette on 18 September 2023.

The obligation to report information on cross-border tax planning mechanisms, which was already included in Law 13/2023, of 24 May 2023, entails an important change in international tax transparency and reinforces the capacity of the states to confront extraterritorial tax evasion.

In particular, the agreement tries to prevent situations where professional advisers and other intermediaries design, market, or assist in the implementation of offshore structures and arrangements that can be used by non-compliant taxpayers to circumvent the correct reporting of relevant information to the tax administration of their jurisdiction of residence, including under the Common Reporting Standards (CRS).

Base erosion and profit shifting (BEPS)

In July 2013, the OECD published a 15-point Action Plan to address BEPS by multinational companies. The Action Plan identifies actions needed to address BEPS, sets deadlines to implement these actions, and identifies resources and methodology needed to implement these actions.

Some jurisdictions and the European Union have already started implementing parts of the actions into national laws. Moreover, the European Union adopted two Anti-Tax Avoidance Directives (ATAD and ATAD 2) that include certain minimum standards to combat tax avoidance. Whilst the ATAD was to primarily be implemented into national laws by 31 December 2018, certain ATAD 2 proposals must be implemented into national laws by 31 December 2019.

Although Spanish legislation was already very similar to ATAD, some amendments to CIT were implemented by Law 11/2021 on the prevention and fight against tax fraud and transposing the ATAD as regards CFC and exit tax rules:

• The previously existing CFC regime was amended. In this regard, the imputation of income that occurs under this regime no longer affects only the income obtained by entities owned by the taxpayer but also the income obtained by their PEs abroad. Likewise, new types of income were introduced that must be subject to imputation under this regime, such as that deriving from dividends, financial leasing operations, or insurance, banking, and other financial activities.
• Exit tax guarantees that, when a taxpayer transfers one's assets or one's tax residence outside the tax jurisdiction of the state, that state taxes the capital gains generated in its territory, even if they have not been realised.

CIT Law established that when residence is changed to another Member State of the European Union, that exit tax could be deferred, at the taxpayer’s request, until the date of transfer to third parties of the assets concerned.

In this regard, and in accordance with the ATAD, the regime was modified with effect from the tax periods starting on 1 January 2021, replacing this deferral with the possibility of splitting payment of the exit tax over five years, when the change of residence is made to another Member State or a third country that is a party to the European Economic Area Agreement, certain additional rules being established in the event that such a split is requested.

In parallel, when the transfer of assets has been subject to an exit tax in a Member State of the European Union, the value determined by that Member State will be accepted as a tax value in Spain, unless it does not reflect the market value.

On 9 March 2021, the Spanish government approved RDL 4/2021 amending the CIT Law and the NRIT Law as regards hybrid mismatches. The stated purpose of these amendments is to write into Spanish domestic law the anti-hybrid rules included in EU Directive 2016/1164, dated 12 July 2016 (ATAD), as amended by EU Directive 2017/952, dated 29 May 2017 (ATAD 2).

The RDL was published in the Spanish State Gazette on 10 March 2021 and entered into force the following day. The new rules effectively apply to the tax years not ended when the new rules entered into force (i.e. 11 March 2021).

While Spain already had some limited-scope anti-hybrid rules, the provisions now transposed into Spanish domestic legislation through RDL 4/2021 aim to cover the whole spectrum of hybrid mismatches arising between Spain and other jurisdictions. These rules will generally only come into play if the parties (located in different territories) to the arrangement are related, or when there is a structured arrangement (i.e. an arrangement involving a hybrid mismatch where the mismatch outcome is priced into the terms of the arrangement or an arrangement that has been designed to produce a hybrid mismatch outcome).

In particular, the new rules address the following situations:

• Mismatches deriving from the use of a hybrid instrument. The new rules disallow the deduction of the expense (‘primary rule’ in BEPS/ATAD parlance) if the payer is in Spain and the mismatch (which must be due to differences in the characterisation of the instrument or transaction) results in no income being recognised in the other jurisdiction or the income is exempt (a deduction without inclusion or ‘D/NI’ outcomes). Importantly, the deduction will also be disallowed if the income benefits from any tax rate reduction, or when the income qualifies for any tax relief or refund other than an ordinary tax credit.  However, a deduction will be allowed if the income is included in the taxable base of the payee in a tax year beginning within a 12 month-period following the end of the tax year when the expense accrued in Spain. The secondary rule (denial of the exemption when Spain is the payee) was already part of the participation exemption regime and is not modified.
• Hybrid entity payer rules. These are rules aimed at neutralising D/NI outcomes resulting from transactions with related parties where the hybrid outcome is a result of differences in the characterisation of the payer entity. When the hybrid entity is in Spain and the other jurisdiction does not recognise the income resulting from the transaction, the deductibility of such expense will be disallowed in Spain to the extent not offset by dual inclusion income (‘DII’). For these purposes, DII is defined as income subject to tax in both Spain and the other jurisdiction. Amounts non-deducted in the current tax year may be offset against DII generated during the following three years.
  
  Spain has implemented the secondary rule and will tax the income, to the extent not offset by DII in the payer’s jurisdiction, when the investor/payee is in Spain and the payer’s jurisdiction has considered the expense deductible. This taxation may be reversed if, during the following three years, the expense is offset in the payer’s jurisdiction against DII.
• Hybrid entity payee rule. A D/NI mismatch arises when, as a result of differences in the characterisation of the payee, an expense arising from a transaction with a related party is deductible in the hands of the payer without generating income in the hands of the payee. In order to address this mismatch, the deductibility of the expense is disallowed when the payer is in Spain. The same primary rule applies to expenses accrued from transactions with PEs and resulting in a deduction without inclusion outcome (either due to differences in the allocation of income between the PE and the head office and/or due to the PE being disregarded).
  
  Spain has made use of the option allowed by ATAD 2 and has not enacted the secondary rule provided for these situations.
• Deemed payments rule. A D/NI outcome can also result from internal dealings between a head office and one of its foreign PEs, or between two PEs (located in different jurisdictions) of the same head office, when one of the jurisdictions allows the deduction of an expense resulting from an internal dealing whilst the other jurisdiction does not recognise any income. When this is the case, Spain will disallow the deductibility of the expense, to the extent not offset by DII. Amounts non-deducted in the current tax year may be offset against DII generated during the following three years.
• Disregarded PEs. In order to avoid double non-inclusion situations, Spain will not apply the branch exemption to the extent that the foreign PE is disregarded in the jurisdiction where it is located.
• Double deduction mismatches. The new rules address double deduction situations arising when an expense accrued by a hybrid entity is regarded as deductible in both the payer’s (the hybrid entity) and the investor’s jurisdictions. Spain has enacted both the primary rule, by disallowing the deductibility of the expense in situations where the investor is in Spain, and the secondary rule, disallowing the deduction when the payer is in Spain. In both cases, the deduction is still allowed to the extent offset by DII and, as in the situations above, amounts non-deducted in the current tax year, may be offset against DII generated during the following three years. Equivalent rules apply to double deduction situations involving PEs.
• Imported mismatches. The imported mismatch rule is incorporated by disallowing the deductibility of expenses corresponding to cross-border transactions with related parties when the expense directly or indirectly funds deductible expenditure giving rise to a hybrid mismatch, except to the extent that the hybrid mismatch has been corrected in one of the other jurisdictions involved.
• Reverse hybrid: This rule seeks to treat a tax transparent Spanish entity as a taxpayer (opaque entity) where its members treat such entity as an opaque entity in order to avoid non-taxation outcomes.

RDL 4/2021 also adopts the ATAD 2 rules concerning dual resident entities and hybrid transfers. 

Finally, the enacted legislation clarifies that the anti-hybrid rules will not apply when the mismatch arises as a result of: 

• the payee being exempt from income tax
• the financial instrument concerned being subject to a special tax regime, or
• valuation differences. 

On 22 December 2021, the Instrument of ratification of the Multilateral Convention (MLI) to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), made in Paris on 24 November 2016, was published in the Official State Gazette. Spain has formally made the relevant notifications with respect to 54 of its 88 tax treaties covered by the MLI. The measures resulting from the modifications introduced as a result of the MLI came into effect in Spain on 1 January 2023 in respect of 49 tax treaties covered by the MLI and came into effect on 1 January 2024 in respect of 5 tax treaties. 

On 25 May 2023, Spain published Law 13/2023 in the Official State Gazette, which introduced new interest deduction limitation rules in line with the ATAD. Because Spain's current interest deduction limitation rules were considered equally effective as those in the ATAD, Spain was authorised to defer the transposition of the ATAD interest deduction limitation until 2024. The new rules, which apply from 1 January 2024, provide that the deduction of net interest expense is limited to 30% of EBITDA (operating profit) for the year, with the explicit exclusion of income, expenses, or rent that have not been included in the tax base. The main items impacted by this measure will be qualifying dividends from Spanish subsidiaries outside the tax group and from foreign subsidiaries, as well as net income obtained through PEs located outside Spain, that have so far been included in EBITDA for purposes of the interest deduction limitation and have benefitted from the 95% (or 100% in case of PEs) tax exemption provided in the Spanish participation exemption.

Reporting obligations for digital platforms operators (DAC 7)

Law 13/2023, of 24 May 2023, transposes the DAC7 rules into the Spanish legislation and introduces obligations on certain platform operators to register, collect, and verify certain information regarding their users (i.e. sellers on the platform) and to report that information to the Spanish tax authorities.

In scope platform operators must register before the Spanish tax authorities, comply with certain due diligence procedures, and report the DAC7 information on an annual basis.

The activities in scope include the provision of personal services, supply of goods, rental of immovable property, and rental of any mode of transport.

Supporting records and documentation will need to be retained for ten years.

Specific penalties are provided for reporting platform operators that do not comply with the registration, reporting, or due diligence obligations.

DAC7 rules also set forth the mechanism for an automatic exchange of DAC7 information between the tax authorities of EU Member States.

Disclosure statements on virtual currencies

Taxpayers who operate with cryptocurrencies will be subject to certain information reporting obligations that will be applicable with respect to fiscal year 2023 and following years. These obligations will affect:

• Persons and entities resident in Spain and PEs in Spain of foreign entities that provide services consisting of safeguarding private cryptographic keys on behalf of third parties to maintain, store, and transfer cryptocurrencies.
• Persons and entities resident in Spain and PEs in Spain of foreign entities that provide services for exchanging virtual currencies and fiat currencies or between different virtual currencies, mediate in any way in the performance of such operations, or provide services to safeguard private cryptographic keys on behalf of third parties, to maintain, store, and transfer virtual currencies, or make initial offerings of new virtual currencies.
• Persons and entities resident in Spain, the PEs in Spain of foreign entities of non-resident persons, or entities with respect to virtual currencies located abroad of which they are holders or of which they are an authorised beneficiary or over which they have power of disposal or of which they are the beneficial owner, custodied by persons or entities that provide services to safeguard private cryptographic keys on behalf of third parties, in order to maintain, store, and transfer virtual currencies.

Mandatory disclosure of cross-border arrangements that can potentially be considered as aggressive tax planning (DAC 6)

DAC 6 provides for mandatory disclosure to the tax authorities of cross-border arrangements among EU countries or between EU countries and countries outside the European Union that can potentially be considered aggressive tax planning.

Responsibility for compliance with reporting requirements first all of falls on the intermediary. However, if the transactions are carried out without an intermediary, if this intermediary is outside the European Union or if it is entitled to legal privilege, it may fall to the taxpayer to comply with the reporting requirements.

The characteristics or features of a reportable cross-border arrangement are listed in the EU DAC 6 Directive and referred to as ‘hallmarks’. Spanish legislation closely follows the Directive, but there are some divergences that need to be considered, such as the requirement to report, under hallmark C1, not only direct but also indirect transactions.

Special tax regime applicable in the Basque Country

Álava, Guipúzcoa and Vizcaya, the three provinces (or Historical/Foral Territories) that make up the Autonomous Community of the Basque Country, have an Economic Agreement (“Concierto Económico”) with Spain's central government (approved by Law 12/2002 of 23 May). According to the Economic Agreement, each province is entitled to maintain, establish and regulate its own tax regime within its respective territory.

In this context, each of the three Historical Territories has enacted its own Corporate Income Tax Act and implementing regulations, applicable to tax periods beginning on or after 1 January 2014, which generally provide more favourable tax incentives for companies than those available in Spain´s Common Territory.

Recently, the Historical Territories approved tax reform bills that introduce significant legislative changes affecting companies, tax groups, and individuals. The changes apply to fiscal years beginning on 1 January 2025 and some have been postponed for fiscal years beginning on or after 1 January 2026.

General tax rate

As of 1 January 2019, the general tax rate is 24%.

Additional taxation on extraordinary profits

For fiscal periods commencing from 1 January 2026 through 31 December 2030, companies applying the general tax rate will see their gross tax liability increased in the periods in which they obtain a positive accounting result exceeding by 35% the average of the positive accounting results obtained in the three preceding tax periods.

For these purposes, a positive accounting result shall be understood as the profit before tax reported in the taxpayer’s financial statements, excluding depreciation, amortisation and impairment charges and reduced by tax adjustments relating to income and by results arising from exceptional circumstances. The increase in the gross tax liability shall result from applying a progressively higher tax rate, ranging from 1% to 4%, to the portion of the increase in the taxable base exceeding the average reported profit.

However, this increase in the gross tax liability shall not apply where the taxpayer has reported zero or negative accounting results in any of the relevant tax periods, nor to newly incorporated entities, among other circumstances.

Lower tax rates and other tax benefits

Small companies

As of 1 January 2019, the general tax rate for small companies is 20%. 

A small company is considered to be a company that meets all the following requirements in the year prior to the application of the special tax regime:

• It carries on a business activity.
• Its net turnover or assets do not exceed EUR 10 million.
• Its average number of staff is fewer than 50.
• An interest of 25% or more in the company is not held, directly or indirectly, by companies that do not meet the above requirements.

Other benefits are as follows:

• Free depreciation for new tangible fixed assets (except buildings).
• General bad debt provision of up to 1% of receivables outstanding.
• Tax-loss carryforwards can fully offset the positive tax base, without any quantitative limit.
• No advanced CIT payment is required.

Micro companies

As of 1 January 2019, the general tax rate for micro companies is 20%.

A micro company is considered to be a company that meets all the following requirements in the year prior to the application of the special tax regime:

• It carries on a business activity.
• Its net turnover or assets do not exceed EUR 2 million.
• Its average number of staff is fewer than 10.
• An interest of 25% or more in the company is not held, directly or indirectly, by companies that do not meet the above requirements.

Other benefits are as follows:

• Free depreciation for new tangible fixed assets (except buildings) and total depreciation/amortisation charges of up to 25% of net tax value or free depreciation for new tangible fixed assets (except buildings).
• General bad debt provision of up to 1% of receivables outstanding. General tax relief of 15% of prior positive taxable income, as 'tax compensation' for the difficulties faced by companies of this size.
• Tax-loss carryforwards can fully offset the positive tax base, without any quantitative limit.
• No advance CIT payment is required.

Holding companies (“Sociedades patrimoniales”)

For holding companies, including, amongst others, real estate companies, the tax rates are as follows:

Taxable income (EUR)	Tax rate (%)
0.00 to 2,500.00	20
2,500.01 to 10,000.00	21
10,000.01 to 15,000.00	22
15,000.01 to 30,000.00	23
30,000.01 and above	25

For tax periods beginning in 2026 onwards, the applicable tax rates for these companies will be as follows:

Taxable income (EUR)	Tax rate (%)
0.00 to 7,500.00	19.0
7,500.01 to 15,000.00	20.0
15,000.01 to 30,000.00	22.0
30,000.01 to 50,000.00	24.0
50,000.01 to 90,000.00	25.5
90,000.01 to 120,000.00	26.0
120,000.01 to 240,000.00	26.5
240,000.01 to 300,000.00	27.0
300,000.01 and above	28.0

For these purposes, companies meeting all the following conditions shall be regarded as holding companies:

• The company's shareholders representing at least 75% of its capital are individuals, holding companies or other companies related to such persons or companies. This requirement should be met throughout the tax period;
• For at least 90 days of the tax period, over half of the company's assets are made up of securities or are not used to carry on business activities. Leased real estate is not considered to be used to carry on a business activity when the company does not have an average annual workforce of three employees exclusively engaged in that activity and working on a full-time basis (three in Vizcaya as of January 2024 and one in Guipúzcoa as of January 2025) on average in a year, who work exclusively for the company on a full-time basis. As of January 2022, no employees are required in Álava and Guipúzcoa if the tenant is a related party, and only one employee in the case of Vizcaya; and
• Companies at least 80% of whose income is generated from assignments of use of real estate that is not considered to be a real estate leasing business activity (see previous paragraph) or is generated from transfers of own capital to third parties or from provisions of services to related parties, and that do not have sufficient personal and material resources, may also be taxed under this tax regime.

This tax regime establishes the following rules for these types of companies:

• All expenses, excluding those stated below, cannot be considered tax deductible.
• In respect of income derived from real estate leasing activities, tax relief is deemed to be:
• 30% of gross income from long-term residential leases;
• 70% of gross income from residential leases entered into through public housing programmes or relating to properties located in stressed residential areas and subject to rent caps;
• 10% of gross income from tourist accommodation leases; and
• 30% of gross income in all other cases.
• In all cases, interest expenses incurred to acquire or refurbish the property shall be deductible, but the combined amount of the tax relief and deductible expenses may not give rise to negative net rental income for any individual property.

Tax-loss carryforwards

Tax-loss carryforwards to be offset in each tax period cannot exceed 50% of the positive tax base prior to offsetting.

This limit does not apply in the following circumstances:

• to micro and small enterprises;
• to income arising from debt waivers or deferrals granted by creditors;
• to income resulting from the reversal of impairment losses included in the taxable base, under certain circumstances; and
• in the tax period in which the entity is liquidated, except in certain cases.

Additionally, the time limit to offset the tax-loss carryforwards is 30 years. Newly incorporated entities may calculate this period as from the first tax period in which they generate a positive taxable base.

As of January 2025, companies may opt to calculate the limits on the use of tax-loss carryforwards against the positive taxable base by reference to the sum of the taxable bases for a block of five consecutive tax periods.

Under this option, a taxpayer may offset up to 100% of the taxable base in each of the first four years of the block, in all cases subject to the aggregate cap for the five‑year period. In the fifth year, if the amount applied in the first four years does not reach the aggregate five‑year cap, the taxpayer may apply any remaining amount up to that cap against the fifth‑year taxable base. Conversely, if the amount applied in the first four years exceeds the cap, the taxpayer must add the excess back to the fifth‑year taxable base and pay a 15% surcharge on that excess.

If the taxpayer opts to calculate both the limit on the offset of tax-loss carryforwards and the limit on the utilisation of tax credits by reference to a block of five years, both rules must be applied using the same five-year period.

Tax deductibility of amortisation of goodwill and intangible assets

Intangible assets should be considered to have a finite useful life.

Amortisation recorded for intangible assets is considered tax deductible over the assets’ useful lives. However, if the useful life cannot be determined, amortisation is tax deductible up to a maximum annual limit of 10%, provided the following requirements are met:

• The assets have been acquired for consideration.
• The acquiring and transferring companies are not related companies.

Furthermore, due to the above-mentioned amendment of the Audit Act, goodwill is amortisable over a useful life of ten years, although this accounting amortisation would not be tax deductible and the corresponding book-to-tax adjustment should be made.

For tax purposes, goodwill amortisation is tax deductible up to a maximum annual limit of 12.5% of its amount if the following requirements are met:

• The goodwill has been acquired for consideration.
• The acquiring and transferring companies are not associated companies.

A restricted reserve does not have to be recognised for this purpose.

However, if an impairment loss is recognised or if the goodwill is transferred, the tax amortisation should be reversed.

Tax deductibility of amortisation of financial goodwill

Financial goodwill is tax deductible up to a maximum annual limit of 12.5% where an interest is acquired in a company that meets the requirements established for the shareholding exemption regime (generally, a minimum holding of 5%, or 3% in the case of listed companies).

The requirements for the shares are as follows:

• A 5% interest (or 3% in the case of listed companies) must be held.
• The investee should be subject to and not exempt from CIT or a similar tax.
• At least 85% of the investee's income should be obtained from business activities.
• Where the shares are not acquired through a regulated market, the acquiring company must not be in any of the situations provided for in Section 42 of the Spanish Commercial Code in relation to the transferor.

Financial goodwill is determined as the portion of the excess of the acquisition price of the shareholding over the shareholder's proportionate interest in the investee's equity at the acquisition date that cannot be allocated to the investee's underlying assets and liabilities in accordance with the principles applicable to business combinations.

Where the acquiree itself holds interests in other entities, the equity, assets and liabilities reflected in the consolidated financial statements prepared in accordance with the Spanish Commercial Code and its implementing regulations must be taken into account when calculating the financial goodwill.

For the purposes of determining the amount eligible for deduction, the amount of any gains realised by previous owners of the shareholding that qualified for the shareholding exemption regime for capital gains (in Vizcaya) or that were not effectively taxed (in Álava and Guipúzcoa) must be deducted from the tax-deductible financial goodwill.

The deduction is compatible with the recognition of impairment losses on the shareholding, but should be taken into account when determining tax-deductible impairment.

Depreciation/amortisation periods

Depreciation/amortisation periods for assets are shorter than those established by the central government CIT law.

Reinvestment relief for extraordinary gains

Income obtained from the sale of tangible fixed assets or intangible assets is not included in the taxable base if the following requirements are met:

• The amount obtained from the sale is reinvested in similar types of assets or in the acquisition of shares that comply with certain requirements within a five-year period (the year preceding the transfer, the year of the transfer and the three subsequent years).
• The asset in which the reinvestment is made is held for five years (three in the case of moveable assets) or, if less, during the asset's useful life.

From 1 January 2018 onwards, the possibility of carrying out the reinvestment through the acquisition of interests in companies has been eliminated.

Income generated from intellectual or industrial property

From 1 July 2016, companies may deduct from taxable income 70% of net income (income less amortisation and directly related expenses) obtained from the licensing to third parties of the right to use or exploit the entity’s intellectual or industrial property rights, provided that such licensing is granted on a temporary basis and that the intellectual or industrial property has been developed by the entity itself or through outsourcing to unrelated third parties.

If the intellectual or industrial property has been partially acquired or developed by related companies, this 70% reduction can only be applied if the ratio of expenses incurred with related parties does not exceed 30% of the expenses incurred in the development carried out by third parties or by the company on its own. However, if this ratio exceeds 30%, the reduction will be reduced proportionally.

The following features have also been introduced regarding this reduction:

• This reduction is no longer applicable to income obtained from the transfer of trademarks.
• Certain limits are applicable if a company applies this reduction and obtains negative income in previous or future years.
• A transitional regime was established for transfers of intellectual or industrial property rights carried out before 1 July 2016. This transitional regime was applicable until 30 June 2021 and its application is optional.

The new tax regulations in force since 1 January 2018 have introduced some changes to the patent box regime. This incentive is limited to income generated from the transfer of the right to use or trading of patents, utility models, medications protection and plant protection products supplementary certificates, or advanced registered software obtained as a result of R&D projects. Therefore, the exclusion area of this regime is extended to, amongst others, rights on information related to industrial, commercial, or scientific experiences (‘know-how’).

In addition, in Álava and Vizcaya, companies may reduce taxable income by 5% of the acquisition price or production cost of intellectual or industry property assets used to carry on their own business activities if they fully own such assets. This reduction cannot exceed 0.5% of income obtained from the business activities in which these assets are used. However, companies may reduce the difference up to that limit as compensation for the use of registered trademarks generated by the entity and used in the course of its business activity. This additional reduction is not applicable in Guipúzcoa.

Limit on the tax deductibility of financial expenses

The tax deductibility of financial expenses is limited to 30% of the operating profit for the tax period (in accordance with EU Directive 2016/1164), according to the following rules:

• Net financial expenses for the tax period are deductible, in any case, up to EUR 3 million.
• A carryforward method is implemented to deduct net financial expenses, which have not been deducted in the following tax period, jointly with those of the corresponding tax period, subject to the limit stated above. In addition, when net financial expenses for the tax period do not reach this limit, the difference between this limit and the net financial expenses for the tax period is added to the limit for tax periods ending in the immediately following five years, until that difference is deducted.

In addition, the application of the thin capitalisation rule to taxpayers that apply the interest-capping rule is not compatible. The thin capitalisation rule only applies if the limit on the tax deductibility of financial expenses stated above does not apply. The general thin capitalisation tax regime is established (with a 3:1 debt-to-equity ratio) to restrict the tax deductibility of financial expenses.

This limit applies to borrowings with any related companies, whether they are resident in Spain, the European Union or any other countries. The limit does not apply when a company's net borrowing with related companies does not exceed EUR 10 million at any time during the tax period.

Companies may ask the tax authorities to propose a different ratio that they can apply.

Finally, expenses arising from transactions carried out with related parties (persons or entities) that, because of a different tax classification at their level, do not generate income or are exempt or subject to a nominal tax rate lower than 10%, are not tax deductible.

Specific limit on the deduction of financial expenses on the acquisition of interests in the capital or equity of any type of company

A specific limit is introduced for financial expenses generated from debts incurred to acquire interests in the capital or equity of any type of company. These expenses are deductible, subject to an additional limit of 30% of the acquirer's operating profits, excluding the operating profits of any company that may merge into the acquirer or that may join its tax group during the four years following the acquisition (besides this specific limit, the general limit on tax deductibility will also apply to these financial expenses).

This specific limit is not applicable when the debt associated with the acquisition of the interest reaches a maximum of 70% and is reduced, as of the time of the acquisition, by at least the proportional part corresponding to each of the following years, until a level equal to 30% of the acquisition price is reached.

Limit for tax relief for expenses incurred on representation, gifts and certain transportation

Expenses incurred on representation, gifts and certain transportation are tax deductible, with certain limits.

In addition to these limits, the allocation rule is maintained for 50% of vehicles used for both business activities and private purposes. In addition, for passenger and other similar cars, the maximum amount of what is understood to be a reasonable acquisition price (EUR 30,000; EUR 40,000 if electric) is maintained, and only expenses for vehicles that do not exceed this acquisition price will be tax deductible.

Charitable donations

As of 1 January 2019 in Vizcaya and 1 January 2022 in Álava, donations are considered to be non-deductible expenses for CIT purposes. However, a tax credit may be available for donations to non-profit organisations that comply with certain requirements, amounting to 30% of the donation. For donations made to listed priority sponsorship activities, the tax credit will amount to 45% of the donation. The general time and quantitative limits for tax credits apply to 'charitable donation' tax credits.

In Guipúzcoa, charitable donations are still considered deductible expenses for CIT purposes.

Impairment losses on equity investments

Losses for impairment on equity investments in companies are tax deductible in accordance with the following regulations:

• If an interest of less than 5% is held in unlisted companies or, otherwise, in listed companies that are group companies, jointly-controlled entities or associates, then the difference between shareholder's equity at the beginning and end of the year, in proportion to the interest held, is tax deductible, taking into account any capital contributions or reimbursements made.
• If an interest of 5% or more is held in unlisted companies or 3% in listed companies, then the difference between the acquisition price and shareholder's equity is deductible in proportion to the interest held, adjusted for latent capital gains at the valuation date.

Shareholder's equity shall be the shareholder's equity recorded in the consolidated annual accounts (see Tax deductibility of financial goodwill above).

Elimination of double taxation for dividends and income obtained from transfers of shares in resident and non-resident companies in Spain (exemption mechanism)

Dividends or shares in profits

In the Basque Country, a full shareholding exemption is established for dividends and for income obtained from transfers of shares in companies resident and non-resident in Spain.

To apply the shareholding exemption to income derived from companies resident in Spain, the requirements established for shareholdings in non-resident companies must also be met:

• A 5% interest (or 3% in the case of listed companies) must be held for one year.
• The subsidiary must be subject to and not exempt from CIT or a similar tax.
• At least 85% of the subsidiary's income must be generated from business activities.

Notwithstanding the above, where dividends obtained from resident subsidiaries do not meet the foregoing requirements, 50% of the amount of the dividend income may be tax exempt. Accordingly, this rule applies to:

• Interests below 5% (or 3% in the case of listed companies) in companies resident in Spain.
• Interests in companies resident in Spain that do not comply with the requirement that 85% of their income is generated from business activities.

Under the CIT regulations, to comply with the ‘subject to tax’ test, the company that distributes the dividend must be subject to a tax that is identical or analogous in nature to Basque CIT (i.e. Vizcaya) at a tax rate not lower than a nominal 10% rate. Therefore, the tax exemption for double taxation does not apply to companies taxed at a tax rate lower than 10%, even if they are resident in a country which has signed a DTT with Spain.

Income obtained from transfers of shares

Capital gains obtained from disposals of interests in resident and non-resident companies are not included in taxable income. The requirements to be met to not include them are the same as the requirements for the application of the dividend exemption (which should be met for all financial years in which the interest is held), except for the requirement regarding the percentage interest (5%, or 3% in the case of listed companies), which must be met on the day when the transfer is made.

Under the CIT regulations, to comply with the ‘subject to tax’ test, the company distributing the dividend must be subject to a tax that is identical or analogous in nature to the Basque CIT (i.e. Vizcaya) at a tax rate no lower than a nominal 10% rate. Therefore, the tax exemption for double taxation does not apply to companies taxed at a tax rate lower than 10%, even if they are resident in a country that has signed a DTT with Spain.

If any of the requirements are not met, the part of the income corresponding to a net increase in retained earnings will not be included in taxable income in proportion to the profits generated in financial years when the requirements are met, and the part that does not correspond to such net increase will be presumed to be generated linearly during the time the interest is held.

In the case of resident subsidiaries that do not comply with the requirements of being subject to CIT or a similar tax and of carrying on business activities, an amount equal to the net increase in retained earnings that may be allocated to the interest in the subsidiary generated while the interest is held (excluding the part that would not have been included in taxable income through the offsetting of tax-loss carryforwards) will not be included in taxable income (up to the limit of calculated income).

Income obtained through permanent establishments (PEs)

The exemption shall not apply when the PE’s income is tax exempt in the jurisdiction in which it is located or is taxed by an identical or similar tax to the CIT at a nominal tax rate lower than 10%.

Participating loans to carry out new business activities or projects

Income generated from variable interest on participating loans is not included in taxable income if it is related to the borrower's profits. The exemption does not apply to remuneration generated from fixed interest.

The following requirements must be met in this case:

• The lender must have a 25% direct or indirect interest in the borrower (15% for listed subsidiaries, and this interest must be held for one year).
• The loan must be used to finance new business activities or projects.
• The exempt income not included in taxable income must be used to grant new participating loans, with the same requirements, or be transferred to the special reserve to foster business capitalisation or the special reserve to boost entrepreneurship and production activities (see below).
• The variable interest may not exceed the following limits:
• 20% of profits (before interest on the participating loan) of the borrower for the percentage of the lender's interest.
• 1.5 times the late payment interest on the average balance of the loan during the tax period.

WHT levied on interest not included in taxable income is not deductible (general 19% tax rate).

Measures to foster companies' capitalisation

Some measures have been introduced to improve the tax treatment of structures based on an increase in shareholders' equity and a reduction in the need to resort to borrowing. These measures are:

Reserve to foster business capitalisation

Companies may reduce taxable income by an amount equal to 15% of the amount by which shareholder's equity is increased for tax purposes compared to previous-year shareholder's equity, and this amount must be allocated to a non-distributable reserve for at least five years. During this five-year period, the company's shareholders' equity must remain the same or be increased, unless it is reduced by accounting losses.

The application of this deduction may not give rise to negative taxable income or an increase in negative taxable income, although amounts not deducted due to insufficient taxable income may be deducted in the following tax periods.

Special reserve for levelling-off of profits

Companies may reduce taxable income by the amount of reported profits allocated to the special reserve for 'levelling-off of profits', up to a maximum amount of 10% of the portion of these profits that may be freely distributed under company law and up to the limit of 15% of taxable income for the financial year. In addition, the special reserve balance may not exceed 25% of shareholder's equity for tax purposes at any time.

This reserve is allocated to offset tax-loss carryforwards, in which case the tax-loss carryforwards cannot be offset in future years; consequently, this is a way to offset tax-loss carryforwards earlier. If, within a period of ten years, the company does not generate tax-loss carryforwards, the reserve will be treated as taxable income. In this case, the effect will be a temporary deferral of tax.

Special reserve to boost entrepreneurship and production activities

In Álava and Vizcaya, companies may reduce taxable income by 65% of annual reported profits. In Guipúzcoa, the reduction is 60%. These profits must be allocated to the special reserve to boost entrepreneurship and production activities, up to a maximum amount of 45% of taxable income. In addition, the balance in this reserve may not exceed 50% of shareholders' equity for tax purposes at any time.

This reserve is not freely distributable and must be used within a period of three years for investment, amongst others, in new non-current assets, assets that give rise to a tax credit for environmental investments, or companies under development.

Investments in new tangible fixed assets

A 10% tax credit can be applied for investments in new tangible fixed assets upon complying with certain requirements. The minimum depreciation period for the assets, excluding computer equipment, is five years. The tax credit is 5% for investments in non-current assets that are considered to be improvements or investments in leased assets carried out by lessees.

The investment should exceed 10% of the carrying amount (less depreciation/amortisation) of the company's tangible fixed assets, buildings and software carried in the previous year. This incentive is improved by facilitating the application of this tax credit when the annual amount of the investment in new tangible fixed assets exceeds EUR 5 million, even though this investment does not exceed the 10% limit stated above.

Research and development (R&D)

A 30% tax credit can be applied to expenses incurred in R&D activities. If the expenses are higher than the average expenses incurred by the company during the previous two years, the tax credit is 50% on the excess amount.

Since January 2025, the tax credit amounts to 35% for expenses incurred in the performance of R&D activities, during the tax period, exclusively related to a substantial reduction in adverse environmental impacts. If the expenses related to mitigating negative environmental impacts are higher than the average expenses incurred by the company during the previous two years, the tax credit is 55% on the excess amount.

An additional tax credit of 20% can be applied to the following expenses:

• Staff expenses incurred for staff exclusively carrying out and qualified to carry out R&D activities.
• Expenses incurred for projects contracted with certain universities and public organisations.

A 10% tax credit can be applied to investments made in tangible fixed assets (excluding buildings) and intangible assets that are exclusively assigned to R&D activities.

Technological innovation (TI)

A 15% or 20% tax credit can be applied to certain expenses incurred for technological innovation, such as projects outsourced to universities or public research organisations, projects related to software engineering, industrial design and new product engineering and design, as well as the acquisition of advanced technology in the form of patents, licences, know-how and designs.

Environmental conservation and improvement, and energy conservation (environmental projects)

Companies are eligible for a 35% tax credit for investments made in equipment or facilities that generate renewable energy, that consume renewable energy or that are included in the Basque List of Clean Technologies, among others, upon complying with certain requirements.

Companies may also qualify for a 15% tax credit for investments made and expenses incurred in new tangible fixed assets and expenses incurred in the remediation of contaminated land, as well as expenses incurred in the implementation of projects for energy recovery, environmental restoration or the minimisation of water use, upon complying with certain requirements.

Financing of R&D, IT and environmental projects

Basque CIT legislations allow the transfer of R&D, IT and environmental tax credits between taxpayers. More specifically, companies that finance R&D, IT and environmental tax projects carried out by third-party companies may credit against their net tax liability up to 120% of the amounts disbursed for the financing of those projects.

Conversely, the company undertaking the project may not apply the amount of the tax credit transferred to the financier, although it may apply any excess, where applicable.

Job creation

To benefit from the tax credit for job creation, the average increase in the workforce must relate to employees with an indefinite contract whose salaries are higher than the minimum inter-professional salary, increased by 70%.

In Vizcaya, the tax credit is 25% of the employee's gross salary up to a limit of 50% of the inter-professional minimum wage. In Álava and Guipúzcoa, the tax credit is EUR 7,000 for each employee and financial year. Higher limits apply where the employee hired belongs to any of the groups facing difficulties in accessing the labour market.

To apply the tax credit, the company’s average number of staff with an indefinite contract must be increased by at least the same number of contracts that generated the tax credit, and this increase must be maintained by the company for three years.

The applicable tax credit increases up to 35% of the employee's gross salary (subject to a cap equal to the statutory minimum wage in force at the time of hiring) if jobs are created for women or people under 36 years who meet certain requisites.

Investment in micro, small, or medium-sized companies that are newly or recently created, innovative or linked to the silver economy

In Álava and Vizcaya, 25% of the amounts paid for the subscription or acquisition of shares or shareholdings in companies considered as micro, small, or medium-sized companies will be deductible from the tax amount.

The tax credit will amount to 35% of the amounts paid for the subscription or acquisition of shares or shareholdings in innovative companies or those whose corporate purpose is directly linked to the silver economy.

Professional training expenses in relation to the silver economy and the caring economy

A tax credit is applicable in Vizcaya for the performance of vocational training activities in relation to the silver economy and the caring economy. 

The tax credit will amount to 10% of the expenses incurred in each fiscal year or, in certain circumstances, to 15%.

Tax incentives for the promotion of culture in Vizcaya

With effect as from 1 January 2023, relevant improvements have been introduced in Vizcaya regarding tax incentives for the promotion of culture. 

Investments and expenses relating to audiovisual works productions

Vizcaya’s taxpayers may generate a tax deduction whose calculation base is the production cost and the costs of obtaining copies and advertising costs. The deduction percentages are as follows:

• 60% in the event that the investments made and expenses incurred in Vizcaya, where the company has its tax domicile, exceed 50% of total investments and expenses.
• 50% in the event that the investments made and expenses incurred in Vizcaya, where the company has its tax domicile, represent between 35% and 50% of total investments and expenses.
• 40% in the event that the investments made and expenses incurred in Vizcaya, where the company has its tax domicile, represent between 20% and 35% of total investments and expenses.
• 35% in the remaining cases.

If the work has been shot entirely in Basque, the deduction percentage will increase by 10 percentage points.

Investments in book publishing

The deduction is 10% of the tax liability in Vizcaya (15% if at least 50% of the publications are in Basque).

Investments in live performances of performing arts and musicals

In Vizcaya, the basis for calculating this deduction will be the direct costs of an artistic, technical, and promotional nature. The amount of the deduction will be 30% of the expenses incurred (40% if the show is in Basque).

The deduction generated in each tax period may not exceed EUR 1 million for each taxpayer, and the amount of the deduction together with any subsidies may not exceed 80% of expenses.

Participation in the financing of audiovisual works, book publishing and live performances of scenic and musical arts

As with R&D, IT and environmental tax credits, Vizcaya legislation permits the transfer of tax credits relating to audiovisual productions, book publishing, live performing and musical arts between taxpayers, under similar terms:

• This deduction will not be applicable if the financier is related to the financed party.
• Obligation to sign a financing contract.
• Financiers may not acquire the intellectual property rights to the work or show.
• Deduction limit for the financier: 1.2 of the amounts disbursed.

Tax incentives for the promotion of culture in Álava and Guipúzcoa

With effect as from 1 January 2024, relevant improvements have been introduced in Álava and Guipúzcoa regarding tax incentives for the promotion of culture.

Investments and expenses relating to audiovisual works productions

Álava and Guipúzcoa taxpayers may generate a tax deduction for which the calculation base is the production cost and the costs of obtaining copies and advertising costs. The deduction percentages are as follows:

• 60% if the investments made and expenses incurred in the Basque Country exceed 50% of the total investments and expenses.
• 50% if the investments made and expenses incurred in the Basque Country represent between 35% and 50% of the total investments and expenses.

If the work is shot entirely in Basque, the deduction percentage will increase by 10 percentage points.

Investments in book publishing

The deduction percentage is 10% in Álava and 5% (15% if at least 50% of the publications are in Basque) in Guipúzcoa.

Investments in live performances of performing arts and musicals

In Álava and Guipúzcoa, the basis for calculating this deduction will be the direct costs of an artistic, technical and promotional nature. The amount of the deduction will be 30% of the expenses incurred (40% if the show is in Basque).

The deduction generated in each tax period may not exceed EUR 1 million for each taxpayer and the amount of the deduction together with any subsidies may not exceed 80% of the expenses.

Participation in the financing of audiovisual works and live performances of scenic and musical arts.

As with R&D, IT and environmental tax credits, the Álava and Guipúzcoa regulations allow the transfer of tax credits relating to audiovisual productions, book publishing and live performing and musical arts between taxpayers, under similar terms:

• This deduction will not be applicable if the financier is related to the financed party.
• Obligation to sign a financing contract.
• Financiers may not acquire the intellectual property rights of the work or show.
• Deduction limit for the financier: 1.2 of the amounts disbursed.

Implementation of work-life balance measures

A tax credit is provided for taxpayers who implement new measures to reconcile personal, family and work life. The deduction will amount to 5% of the tax due for the implementation of a work-life balance plan (capped at EUR 2,500), or 15% when more than one third of the employees are covered by such a plan (capped at EUR 7,500).

Employer contributions to pension plans

A tax credit is established for taxpayers who make employer contributions to pension plans. The deduction will range from 5% to 25%, depending on the proportion that such contributions represent relative to the total annual gross salary paid by the employing entity.

Time limits for the application of tax credits

The time limit for the application of the tax credits is 30 years.

The time limit may be deferred until the first tax period in which, within the statute of limitations period, the taxpayer generates positive taxable income.

Quantitative limits for the application of tax credits

The application of tax credits against the net tax liability (i.e. the taxable base multiplied by the applicable tax rate and reduced by double taxation tax credits) is subject to the following limits:

•  First, 35% limit on the net tax liability: applicable to all tax credits, except those subject to the specific limits of 70% and 50%.
• Second, 70% limit on the net tax liability reduced by the tax credits subject to the 35% limit: tax credits for R&D, for IT and for the financing of R&D and IT projects.
• Third, 50% limit on the net tax liability reduced by the tax credits subject to the 35% and 70% limits: tax credits for environmental projects, for the financing of environmental projects, for the promotion of culture and for the financing of promotion of culture. However, in Guipúzcoa, the tax credits for the financing of promotion of culture are subject to the 35% limit.

Notwithstanding the foregoing, effective January 2025, the three Basque Tax Authorities introduced a voluntary option to calculate the limits on the use of tax credits against the tax liability by reference to the sum of the net tax liability for a block of five consecutive tax periods.

Under this option, a taxpayer may offset up to 100% of the net tax liability in each of the first four years of the block, subject in all cases to the aggregate cap for the five-year period.

Accordingly, in the fifth year, if the amount applied in the first four years does not reach the aggregate five-year cap, the taxpayer may apply any remaining amount up to that cap against the fifth-year liability. Conversely, if the amount applied in the first four years exceeds the cap, the taxpayer must add the excess back to the fifth-year net tax liability and pay a 5% surcharge on that excess.

If the taxpayer opts to calculate both the limit on the offset of tax-loss carryforwards and the limit on the utilisation of tax credits by reference to a period comprising five consecutive tax years, both rules must be applied using the same five-year period.

Effective tax rate and minimum tax

As of 2026, the application of 35%, 70% and 50% limit tax credits against the net tax liability may not reduce the effective tax liability below 19% of the taxable base. In previous tax periods, the applicable percentage was 17% and, prior to that, 15%.

This limit does not apply to entities subject to Pillar Two, nor to the application of tax credits for R&D, for IT, for environmental projects or for the promotion of culture, or to the corresponding tax credits for the financing of such four activities. Notwithstanding, in Guipúzcoa this limit is applicable to the financing of the promotion of culture.

However, the legislation provides for a reduction of the general 19% minimum taxation threshold in the following circumstances:

• to 15% for micro and small enterprises;
• to 13% for micro and small enterprises that either maintain or increase the average number of employees with permanent contracts compared to the previous tax year 

• to 17% for companies subject to the general tax rate that either maintain the average number of employees with permanent contracts compared to the previous tax year or make investments that qualify for tax credits for investments in new tangible fixed assets, R&D, IT, environmental investments or the corresponding financing tax credits; 

• to 15% for companies subject to the general tax rate that (i) both maintain the average number of employees with permanent contracts compared to the previous tax year and make investments qualifying for the tax credits for new non-current assets, R&D, IT, environmental investments or the corresponding financing regimes; or (ii) increase the average number of employees with permanent contracts compared to the previous tax year.

 

Company	General tax rate (%)	Minimum tax rate (%)	Minimum reduced tax rate (%)
General	24	17	15
Micro and Small	20	15	13

In addition, the legislation provides for certain other specific cases in which the minimum taxation threshold may be reduced.

Advance CIT payment

During the first 25 calendar days of October each year, companies must self-assess an advance payment on account of the tax period that is in progress on the first day of that month. However, entities qualifying as micro or small enterprises are not required to make the advance payment.

The advance payment is 5% of the tax base for the tax period whose filing deadline has expired on 1 October and is subsequently reduced by withholding taxes and payments on account corresponding to the preceding tax period.

The advance payment is deductible from the effective tax liability. 

Tax groups

The Economic Agreement establishes that the same rules as for Spanish Common Territory must apply to Basque companies regarding the composition of tax groups, the definition of controlling companies and subsidiaries, and the tax treatment of internal operations carried out in tax groups.

In this regard, it should be noted that tax groups must be formed by entities subject to the same tax legislation, i.e. they must consist exclusively of entities to which the same tax regime applies (Basque or State/Common Territory). Accordingly, two types of tax groups may exist: (i) Basque tax groups, comprising groups in which both the parent company and all of its subsidiaries are subject to Basque tax legislation; and (ii) Common Territory tax groups, comprising groups in which both the parent company and all of its subsidiaries are subject to Common Territory tax legislation.

However, the recent tax reform for the Spanish Common Territory would apply to Basque tax groups, so:

• A non-resident company or company resident in the Spanish Common Territory may be the controlling company of a Basque tax group (horizontal consolidation).
• A Basque tax group of companies indirectly owned by companies that do not form part of the group (non-resident or resident in Spanish Common Territory) can be formed.

As established in the Spanish Common Territory regulations, when the controlling company is a non-resident company, one of the companies that makes up the group is appointed as the representative and is responsible for compliance with the group's statutory requirements and formalities. Under Basque regulations, the representative company of a Basque tax group must be:

• The controlling company, if this company is resident in Spanish territory, or
• The Basque company of the tax group with the highest turnover in the previous tax year (if no other company resident in Spanish territory meets the requirements established in the tax regulations to be considered the controlling company).

However, the non-resident controlling company may appoint any other company of the Basque tax group of companies as the group’s representative as long as the appointed company is subject to the tax regulations applicable to the company of the tax group with the highest turnover in the previous tax year.

Tax regime applicable to the UEFA finals

On the occasion of the celebration of the final of the UEFA Women's Champions League 2024 on Saturday, 25 May 2024 and the UEFA Europa League 2025 in May 2025 at San Mames stadium in Bilbao, Vizcaya introduced a special tax scheme applicable to these international sports competitions.

The following income linked to the holding of the competitions will be exempt:

• Income obtained by both UEFA and the participating teams and resident legal entities established for the purpose of the competitions will be exempt from corporate tax. Additionally, income obtained by taxpayers who operate through a PE will be exempt from non-resident income tax (NRIT).
• The above entities will also be exempt from any local taxes that may accrue during the competitions.
• Income obtained by employees, delegates and representatives of the aforementioned entities will be exempt from PIT.

The holding of the competitions will be considered a priority activity during 2024 and 2025.

These tax measures will be in force until 31 December 2025 for individuals and 1 January 2026 for other entities.

Exit tax regime

In accordance with the provisions of the EU Directive (EU) of the Council, of 12 July 2016, the exit tax regime for cases where there is a change of residence and cessations of PEs is modified from FY 2018 onwards, replacing the deferral regime by a fractioning mechanism (fractioning over tax periods ending in the five years immediately following the exit).

Obligation to disclose assets located overseas

The obligation to disclose assets located overseas, such as accounts, shares, real estate or vehicles, is also established in the three Basque territories. Taxpayers in these territories should file a tax return (Form 720) annually between 1 January and 31 March to declare these assets. Fines are imposed if CIT payers fail to comply with this obligation.