Over the past year, the following significant amendments have been made to Spanish law on the taxation of companies:
On 10 March 2021, Royal Decree Law (RDL) 4/2021, of 9 March 2021, was published in the Official State Gazette. According to this legislation and with effects for tax periods beginning on or after 1 January 2020 that have not ended on 11 March 2021, the European Union (EU) rules on hybrid mismatches with third countries (Dir (EU) 2016/1164) are written into Spanish law, except for the rule on inverted hybrid mismatches.
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 (CIT) and with effect for tax periods beginning on or after 1 January 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 million euros (EUR) but were not at least 5%. Holdings acquired in tax periods starting before 1 January 2021 that had an acquisition value greater than EUR 20 million 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 these types of companies, the exemption will be 100% in the case of dividends received by entities that, having a turnover of less than EUR 40 million, set up their first subsidiary as of 1 January 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 EUR 20 million.
- 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 research and development (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 three years without prejudice to its ability to fully or partially commercialise 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 permanent establishment (PE) is modified to incorporate the provisions of the European Economic Area (EEA) 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 the CIT, the exemption applicable to dividends distributed by subsidiary companies that are resident in Spain for tax purposes to their parent companies resident in other EEA member states or to the PEs 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 EUR 20 million, leaving as a requirement the minimum direct or indirect 5% percentage and provided that the rest of the requirements set forth are met.
- Regarding the value-added tax (VAT), the special use and enjoyment rule applicable to services is modified and will no longer apply to those services that, according to the localisation 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 not be subject to VAT (note that the general rule of place of supply at destination is applicable to business-to-business [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% to 21%. Effective 1 January 2021, the tax on insurance premiums is raised from 6% to 8%.
On 18 November 2020, RDL 34/2020, of 17 November 2020, was published in the Official Gazette. The most important amendments that affect the taxation of companies contained in this Law are:
- Amendments 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 amortisation regarding new fixed material assets that meet certain requirements, that affect the automotive industrial sector, and 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 intra-community 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 RDL 15/2020 and RDL 28/2020 regarding the period 23 April 2020 to 31 October 2020.
- A 4% VAT rate is applicable from 19 November 2021 to 31 December 2021 to domestic supplies, imports, and intra-community 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 1 December in the year prior to the acquisition of over EUR 1 billion. 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 transmission 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 EUR 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 EUR 3 million will be considered as taxpayers.
- For entities belonging to a group of companies, the thresholds are determined at the group level. This law will come into force three months after its publication in the Official State Gazette (i.e. 16 January 2021).