Over the past year, the following significant amendments have been made to Spanish law on the taxation of companies:
Royal Decree-Law 8/2023
Royal Decree-Law 8/2023, which adopts measures to address the economic and social consequences of the conflicts in Ukraine and the Middle East, as well as to alleviate the effects of drought was approved on December 27 and published in the Spanish Official Gazette on December 28.
The most significant amendments contained in this legal text that affect the taxation of companies are the following:
- Certain measures are extended to counteract the economic and social consequences of the war in Ukraine. In this sense and to contribute to the reduction of its final price, the reduced VAT rates of 5% on olive and seed oils and pasta and 0% on staple food are extended until June 30, 2024.
- In order to contain prices and support the most affected citizens also in the field of energy, the application of reduced VAT on certain supplies of electrical energy and natural gas is extended. In this sense, the VAT rate applicable to intra-community supplies, imports and acquisitions of electrical energy will be 10% during 2024, instead of the 5% applicable until December 31, 2023. The same rate will apply to natural gas until March 31, 2023, and to briquettes and pellets from biomass as well as timber for firewood, until June 30, 2024.
- Regarding the tax on the value of electricity, its suspension as an exceptional measure had been extended until December 31, 2023. Due to the reduction in the price of electricity in recent months, said measure is mitigated. In this sense, during 2024, the tax base will comprise the total amount that the taxpayer must receive for the production and incorporation of electrical energy into the electricity system, measured in power plant bars, for each facility, in the tax period. reduced by half of the remuneration pertaining to the electricity included in the system during the first calendar quarter and reduced by a quarter of the remuneration pertaining to the electricity included in the system during the second calendar quarter.
- It is also considered necessary to mitigate the exceptional measure to reduce the tax rate of the Special Tax on Electricity (0.5% until December 31, 2023). Thus, during the first quarter of 2024, the tax rate will be 2.5% increasing to 3.8% during the second quarter.
- The coefficients of the Tax on the Increase in Urban Land Value are reduced during 2024, according to the period of generation of the increase in value.
- As regards Corporate Income Tax, the incentive of freedom of amortization in relation to investments in self-consumption electricity facilities and investments in facilities that use energy from renewable sources is extended during 2024, subject to compliance with certain requirements.,
- The application of temporary energy taxes and taxes on credit institutions and financial credit establishments is extended during 2024.
- Certain modifications are introduced to the Economic and Fiscal Regime of the Canary Islands, with effect from January 1, 2024, and that affect, inter alia, advance investments and the validity of tax incentives for entities in the Canary Islands Special Zone.
Royal Decree-Law 6/2023
Royal Decree-Law 6/2023, of December 19, which approved urgent measures for the execution of the Recovery, Transformation and Resilience Plan in matters of public service of justice, public service, local government and patronage, was published in the Spanish Official Gazette last December 20. The most significant amendments included in this regulation, all of them effective as of January 1, 2024, are the following:
- The tax credit for donations percentages applicable to both individuals and legal persons and to non-residents without a permanent establishment in Spain are increased:
- Where the donor is an individual, the donation base that entitles the donor to a tax credit of 80% with respect to his/her Personal Income Tax increases from 150 to 250 euros. The excess over 250 euros will entitle the donor to a 40% tax credit, compared to the previous 35%.
- For legal entities, tax credits for donations in Corporate Income Tax increase from 35 to 40% while the tax credit base may not exceed 15% of the tax base for the tax period (compared to the previous 10%).
The number of years in which a donor or contributor must make donations to the same entity to qualify for the increased tax credit percentages is reduced from 4 to 3 and the percentages are Thus, if in the previous two years a donation had been made to the same entity, the amount of the donation for this year and the previous year being equal to or greater, in each of them, than that of the immediately preceding year, the tax credit percentage would be 45% in the case of natural persons (currently 40%) and 50% in the case of legal entities (currently 40%).
The objective of this measure is none other than to provide greater stability to the financing of these entities and ensure the ongoing participation of the private sector in activities of general interest.
- Regarding non-residents who operate in Spanish territory without a permanent establishment, the tax credit provided for PIT taxpayers may be applied as before. However, the applicable limit to the tax credit base is increased by 5 percentage points.
- The different types of donations that entitle the donor to the tax credit are expanded and include the transfer of use of a movable or immovable property for a specific period of time and for no consideration.
- Symbolic consideration is allowed. In this sense, it is established that the right to apply the tax credit will not be forfeited when the donor or contributor receives goods or services from the donee or beneficiary, provided that the value of said goods or services does not represent more than 15% of the value of the donation or contribution and, in any case, does not exceed the amount of 25,000 euros.
- Actions for the socio-labour insertion of people at risk of social exclusion and the activities concerning education of the gifted are incorporated into the list of economic operations exempt from CIT of the entities benefiting from patronage that apply the special regime of Law 49/2002.
The spectrum of R&D activities that can enjoy the exemption is expanded to include all those defined as such in article 35 of the Corporate Tax Law and innovation activities are included for the first time.
- To guarantee the proper functioning of these entities, it is specified that payment of civil liability insurance contracted by the non-profit entity for the benefit of employers, statutory representatives and members of government bodies will not be considered remuneration if it covers only risks resulting from holding such positions in the entity.
- Business collaboration agreements in activities of general interest allow the entities that benefit from patronage to receive financial aid in exchange for disseminating the collaborators ‘participation by any means. In this sense, the possibility of this financial aid being in-kind aid is included. Although this mechanism had already been accepted by administrative doctrine, its inclusion in the standard confers greater legal certainty. At the same time, the possibility is included that this financial aid is granted in the form of a provision of services within the activity carried out by the collaborator. This allows the deductibility of the expense that the collaborator incurs due to this benefit. It is also specified that the positive income that may arise because of this financial aid is exempt from taxes on the collaborators’ income.
- Finally, and to make the dissemination of the collaborators’ participation more effective, it is accepted that said dissemination can be carried out by either the collaborator or the entities benefiting from the patronage. Until now, only entities that benefit from patronage could carry out such dissemination.
Royal Decree-Law 5/2023
Royal Decree-Law 5/2023, which was enacted on 28 June 2023, through which measures to respond to the economic and social consequences of the war in Ukraine and to support the reconstruction of the island of La Palma and other situations of vulnerability were adopted and extended, and the European Union (EU) Directives on structural modifications of trading companies and the work/life balance for parents and caregivers were transposed, ensuring the execution and compliance with EU law. The most important measures contained in this legislation that affect corporate taxation are:
- An accelerated depreciation system is introduced in corporate income tax (CIT) for the installation of systems to charge batteries for plug-in electric vehicles, provided that they come into use in tax years 2023, 2024, and 2025.
- The tax benefits foreseen for the island of La Palma as regards business tax and real estate tax are extended until 31 December 2023.
- The extension until 31 December 2023 of the 0% value-added tax (VAT) rate applicable to basic food products and the 5% VAT rate on olive and seed oils, as well as pasta.
Law 13/2023, which was enacted on 24 May 2023, amending the General Tax Law, because of the transposition of EU Directive 2021/514 as well as other tax laws, was published in the Official State Gazette on 25 May 2023. The main amendments included in this law that affect corporate taxation are the following:
- The deductibility of financial expenses for CIT purposes is modified with effect for tax periods beginning on or after 1 January 2024.
The amount of net deductible financial expenses in the tax period is generally reduced to 30% of operating profit (financial expenses of less than 1 million euros [EUR] being deductible regardless of the 30% limit). Because of this amendment, revenues, income, or expenses that have not been included in the CIT base will not be considered in the determination of operating profit.
Additionally, the limitation of the financial expense rule is amended to exclude from its non-application mortgage securitisation funds and asset securitisation funds.
- Several amendments are included in the mutual agreement procedure regime contained in the non-resident income tax (NRIT) law.
- As regards VAT, the most important amendments are the following:
- With effect from 26 May 2023, the use and enjoyment rule, which allows taxation in the Spanish territory of application of the tax (TAI) of those services carried out outside the Autonomous Community, but whose effective use occurs in the Autonomous Community, is amended to exclude its application to financial and insurance transactions between entrepreneurs. The aim of this amendment is to guarantee VAT neutrality and competition in these strategic sectors of the Spanish economy on equivalent terms to the other sectors of economic activity excluded from the application of this rule.
- The import regime for electronic commerce (IOSS) is amended to allow entrepreneurs and professionals who have the headquarters of their economic activity in the Canary Islands, Ceuta, or Melilla to benefit from this regime without the need to have a representative established in the Autonomous Community.
- Some modifications are included in the non-customs deposit regime for products subject to excise duties.
- Additionally, several amendments are introduced to the General Tax Law, specifically:
- Council Directive (EU) 2021/514, of 22 March 2021, amending Directive 2011/16/EU on administrative cooperation in the field of taxation, known as DAC 7, is transposed, and a new reporting obligation is introduced for digital platform operators. A penalties regime is also established for non-compliance with information, due diligence, and registering obligations. Communication obligations concerning the information collected from sellers and storage obligations regarding supporting documentation are also introduced.
- As regards DAC 6, the legal regime governing the reporting obligation on cross-border tax planning mechanisms is modified as a consequence of the signing by Spain of the Multilateral Agreement between Competent Authorities on the automatic exchange of information regarding Common Reporting Standard (CRS) circumvention arrangements and opaque offshore structures and Standards for Mandatory Reporting to address circumvention of the CRS and opaque offshore structures within the Organisation for Economic Co-operation and Development (OECD). The amendment aims to enable the Spanish Tax Administration to have the necessary information to proceed with the exchange of information.
- The reporting obligations between individuals are amended to comply with EU Court jurisprudence. In this regard, the regime governing reporting obligations for certain tax planning mechanisms is amended to exempt certain intermediaries from the reporting obligation on the grounds of professional secrecy. Intermediaries will need to communicate to individual taxpayers that they will provide the tax authorities with information related to them and that such information will be transferred according to Directive 2011/16/EU and international agreements in order to guarantee the exercise of the right to the protection of their personal data.
- The obligation to report information on cross-border tax planning mechanisms is clarified to include as obligated parties persons or entities that are considered intermediaries or interested taxpayers, according to the Multilateral Agreement between Competent Authorities on the automatic exchange of information.
- Reporting and due diligence obligations relating to financial accounts in respect of mutual assistance are clarified in order to guarantee the exercise by individuals of the right to the protection of personal data regarding existing information obligations.
- The possibility of carrying out common tax audits with the tax authorities of different member states is introduced in relation to mutual assistance among the tax authorities of different member states.
- The procedure to correct self-assessments is amended, implementing a unique system to rectify, complete, or modify the self-assessment previously submitted, regardless of the result of the same.
- The tax administration’s powers in limited verification procedures are extended. In this regard, it will be possible to check the accounting records to verify that they are consistent with the information in possession of the tax authorities. Additionally, it will be possible to require third parties to provide supporting documentation to verify the accuracy of the information in possession of the tax authorities.
- Corporations or entities will be required to communicate to the Spanish tax authorities their beneficial owners in accordance with anti-money laundering legislation.
Law 9/2023, which was enacted on 3 April 2023, amends Law 12/2002, of 23 May 2002, which approved the Economic Agreement with the Autonomous Community of the Basque Country, and was published in the Official State Gazette on 4 April 2023. The main amendments included in this law that affect corporate taxation are the incorporation of two new taxes: the Tax on Financial Transactions and the Tax on Certain Digital Services:
- The Tax on Financial Transactions will be governed in the Historical Territories by the same substantive and formal regulations established by the Central Government. The taxpayers subject to this tax will pay tax to both administrations in proportion to the volume of operations carried out in each territory during the assessment period.
This proportion will be determined based on the percentage that the taxable base of the tax corresponding to operations related to shares of companies with registered office in common or provincial territory represents with respect to each taxpayer’s total taxable base.
The inspection will be carried out by the competent tax administration by reason of the territory in which the taxpayer has their tax domicile.
- The Tax on Certain Digital Services will be governed in the Historical Territories by the same substantive and formal regulations established by the Central Government from time to time.
The taxpayers subject to tax will pay both administrations in proportion to the volume of digital services rendered in each territory.
The provision of digital services will be understood to be carried out in common or regional territory depending on the place where the users are located.
The inspection will be carried out by the competent tax administration by reason of the territory in which the taxpayer has their tax domicile.
- Likewise, the wording regarding VAT has been modified in order to adapt it in relation to cross-border electronic commerce.