Over the past year, the following significant amendments have been made to Spanish law on the taxation of companies:
On 31 December 2020, Law 11/2020, of 30 December 2020, was published in the Official State Gazette. The main measures contained in this Law were the following:
- As regards corporate income tax and with effect for tax periods beginning on or after January 1,2021, the following amendments are introduced:
- The exemption on dividends and capital gains associated with holdings of at least 5% in both resident and non-resident entities is reduced to 95% . This implies an effective tax rate on this type of income of 1.25% for those entities subject to the general CIT rate. 5% of the dividends distributed among entities that are part of the same tax consolidation group will also be subject to tax, which generates a cascading effect.
- With the same purpose and the necessary technical adjustments, the Article that regulates the elimination of international economic double taxation on dividends from non-resident entities
- The exemption is eliminated for dividends and capital gains associated with holdings whose acquisition value was greater than € 20,000,000 but were not at least 5%. Holdings acquired in tax periods starting before January 1, 2021 that had an acquisition value greater than 20,000,000 euros but that did not meet the minimum 5% requirement may continue applying the 95% exemption regime until 2025.
- In order to allow the growth of this type of companies, the exemption will be 100% in the case of dividends received by entities that, having a turnover of less than € 40,000,000, set up their first subsidiary as of January 1, 2021. This measure will only be applicable the first three years from the incorporation of the company
- The rules on the deductibility of financial expenses are modified eliminating the additional operating profits in respect of financial income from participations in equity instruments that correspond to dividends when the acquisition value of such participations exceeds € 20,000,000
- As regards tax credit for investments in Spanish productions of feature films and cinematographic short films and audiovisual series of animation or documentary fiction, the following modifications are made:
- access to the tax credit is extended to taxpayers that contribute amounts as financing to defray all or part of the production costs without acquiring intellectual property rights or rights of any other nature regarding the results of the same, which must be owned in any case by the producer
- the general limit for tax credits, generally amounting to 25%, is increased to 50% when the amount corresponding to expenses and investments made for this item and for R&D or technological innovation in the tax period itself exceeds 10% of the gross tax liability reduced by international economic double taxation tax credits and rebates .
- The period during which the assets related to this tax credit must remain in operation is reduced and is considered to be fulfilled when the producer maintains the same percentage of ownership of the work for a period of 3 years without prejudice to its ability to fully or partially commercialize the exploitation rights derived from it to one or more third parties.
- Regarding non-residents’ income tax, the exemption for interest and other income arising from the transfer to third parties of own capital and for capital gains derived from movable property obtained without a PE is modified to incorporate the provisions of the European Economic Area Agreement, so that States that are parties to such agreement but are not part of the European Union may apply the exemption like EU Member States.
- In line with the measures introduced in corporate income tax, the exemption applicable to dividends distributed by subsidiary companies that are resident in Spain for tax purposes to their parent companies resident in other European Economic Area member states or to the permanent establishments of the latter located in the European Economic Area is modified eliminating the possibility to apply the exemption when the acquisition value of the holding is greater than € 20,000,000, leaving as a requirement the minimum direct or indirect 5% percentage and provided that the rest of the requirements set forth are met.
- In VAT, the special use and enjoyment rule applicable to services is modified and will no longer apply to those services that, according to the localization rules, are understood to be carried out in the Canary Islands, Ceuta and Melilla. Therefore, services provided to clients located in the Canary Islands, Ceuta and Melilla will generally be not subject to VAT (general rule of place of supply at destination applicable to B2B-operations).
- Likewise, the tax rate applicable to soft drinks, juices and soft drinks with added sugars or sweeteners is raised from being taxed at 10 percent to 21 percent. Effective January 1, 2021, the tax on insurance premiums is raised, from 6% to 8%.
On 18 November, Royal Decree-Law 34/2020, of 17 November, was published in the Official Gazette.The most important amendments that affect the taxation of companies contained in this law are:
- Amendements related to tax credit for foreign film productions, tax credit for innovation in processes related to the chain value in the automotive industry and freedom of amortization regarding new fixed material assets that meet certain requirements and that affect the automotive industrial sector and they are made in order to adapt these tax incentives to EU requirements.
- As regards VAT, 0% VAT rate is applicable from 1 November 2020 to 30 April 2021 to domestic supplies, imports and intracommunity acquisitions of certain medical equipment to combat COVID-19 when its recipients are public entities, hospitals or private social entities. This exemption was previously contained in Royal Decree-Law 15/2020 and Royal Decree-Law 28/2020 regarding the period 23 April to 31 October 2020.
- 4% VAT rate is applicable from 19 November 2021 to 31 December 2021 to domestic supplies, imports and intracommunity acquisitions of disposable hygienic facemasks.
On 16 October 2020, Law 5/2020, of 15 October 2020, was published in the Official State Gazette. Under this Law, a new indirect tax is created on onerous acquisitions of shares in listed Spanish companies with a capitalisation value at December 1 in the year prior to the acquisition over 1 billion euros. The tax rate is 0.2% and is levied regardless of the place of residence of the parties or where the transaction takes place. Certain exemptions are established that mainly affect the primary market and the acquisitions necessary for the operation of market infrastructures, relating to business restructurings, those made between companies of the same group, temporary assignments and certain acquisitions of own shares. This law will come into force three months after its publication in the Official State Gazette (i.e 16 January 2021).
On 16 October 2020, Law 4/2020, of 15 October 2020, was published in the Official State Gazette:
- Under this Law, a new indirect tax is created for the provision of certain digital services (online advertising, online intermediation and data transmition services) in which there is an intervention of users located in Spain. The tax rate is 3%. Only those entities (Spanish tax resident or not) whose total income for the previous tax year exceeds € 750 million or those entities whose income derived from the provision of digital services carried out in the Spanish territory in the previous tax year exceed € 3 million will be considered as taxpayers.
- For entities belonging to a group of companies, the thresholds are determined at group level. This law will come into force three months after its publication in the Official State Gazette (i.e 16 January 2021).
Several temporary measures have been approved in response to the economic impact of COVID-19. The main non-expired measures that affect the taxation of companies are the following:
- On 24 June 2020, Royal Decree Law (RDL) 23/2020, of 23 June 2020, was published in the Official State Gazette. The main measures contained in this RDL that affect the taxation of companies and, in particular, the automotive industry are the following:
- Investments made in new fixed material assets (excluding real estate) that involve the sensorisation and monitoring of the production chain, as well as the implementation of manufacturing systems based on modular platforms or that reduce environmental impact, affecting the automotive industrial sector, made available to the taxpayer in 2020 may be freely depreciated with a maximum investment of 500,000 euros (EUR) and conditional on the maintenance of the average workforce for year 2019 during the 24 months following the beginning of the tax period in which the items purchased come into operation.
- In relation to the tax credit for technological innovation, the rate of tax credit is increased to 25% during tax periods starting in 2020 and 2021 for expenses incurred in obtaining new production processes in the automotive industry value chain or substantial improvements to existing ones.
- On 27 May 2020, RDL 19/2020, of 26 May 2020, was published in the Official State Gazette. Under this RDL, the deadline for filing of corporate income tax (CIT) returns is maintained, but those companies that, as a result of the COVID-19 situation, have not been able to approve their financial statements will be able to submit a return using the available accounting information and amend the return when the companies’ annual accounts are approved within 30 November 2020, paying late-payment interest but no surcharge.
- On 6 May 2020, RDL 17/2020, of 5 May 2020, was published in the Official State Gazette. Under this RDL, in order to promote the competitiveness of the Spanish film and audio-visual sector in the national and international environment, tax incentives related to film production are increased with effect from tax periods commencing on or after 1 January 2020.
- On 18 March 2020, RDL 8/2020, of 17 March 2020, was published in the Official State Gazette. Amongst other measures, it included a stamp duty exemption applicable to certain novations of credits and mortgage loans due to the COVID-19 economic impact.
- On 5 February 2020, RDL 3/2020, of 4 February 2020, was published in the Official State Gazette. The main measures contained in this regulation that affect the taxation of companies are:
- The transposition of Council Directive (EU) 2018/1910 of 4 December 2018 amending Directive 2006/112/EC as regards the harmonisation and simplification of certain rules in the value-added tax (VAT) system for the taxation of trade between member states. The main amendments included concern call-off stock arrangements, chain transactions, the role of the VAT identification number in the context of the exemption of intra-Community supplies, and proof of transport for the purposes of the exemption for intra-Community transactions.
- The transposition of Council Directive (EU) 2017/1852 of 10 October 2017, on mechanisms to resolve disputes between member states when those disputes arise from the interpretation and application of agreements and conventions that provide for the elimination of double taxation of income and, where applicable, capital.