The new reform of the Corporate Income Tax Law
On Friday December 2, the Spanish Council of Ministers approved as a matter of urgency a package of tax measures aimed primarily at reducing the public deficit.
Once again, the reform mainly affects businesses, with substantial amendments being made to Corporate Income Tax rules, aimed at increasing the assessment bases on which companies’ Tax is calculated and guaranteeing the Treasury a certain minimum volume of tax revenues. With this latest reform, the Government has managed to reduce the difference between effective and nominal tax rates, without nominal rates having been changed.
To guarantee a minimum level of tax revenues, with effect as from the current year 2016, the reform has once again focused on the Taxation of large companies, essentially introducing two measures aimed at taxpayers whose net revenues for the previous year amounted to over 20 million Euros.
- On the other hand, once again, the higher the taxpayer’s net revenues, the greater the restrictions placed on the offsetting of tax losses, with a limit on tax loss offsets equal to 50% of taxable income in the case of companies whose net revenues for the previous 12 months were between 20 and 60 million Euros, and to 25% in the case of those with net revenues in excess of 60 million. This is therefore a return to the restrictions applicable in the years 2012 to 2015.
- Similarly, the application of credits for the avoidance of domestic and international double taxation, is limited to 50% of the taxpayer’s gross tax payable.
The other amendments introduced, which seek to increase taxable income, are centered on restricting the deduction of portfolio impairment losses. Also with effect as from 2016, the new reform introduces the obligation to recover on a straight-line basis over 5 years, as a minimum, all portfolio impairment losses deducted by the taxpayer up to 2013.
Limits are also imposed, in turn, on the deduction of losses made on the sale of ownership interests in the capital of entities, whenever there is entitlement to an exemption on positive income obtained from such ownership interests. This measure, however, does not come into force until 2017.
It should be noted, however, that no restriction is placed on the deduction of losses obtained upon extinguishment of an investee (unless this is as the result of a restructuring transaction), except for the amount of dividends received from such investee over the preceding 10 years which did not reduce the acquisition value and generated entitlement to exemption or to a credit for the avoidance of double taxation.
Garrigues Tax Law department