On November 21, the Spanish Parliament (Congreso de los Diputados) approved and sent to the Senate the Draft Law establishing a complementary tax for multinational groups and large domestic companies, as the implementation of Pillar 2 of the OECD.
This draft law includes significant amendments to Law 27/2014 on Corporate Tax (CIT) and Law 35/2006 on Personal Income Tax (PIT).
Some of these measures were previously mentioned in our tax update from November 6.
a) In the area of CIT
- Limits on the compensation of Negative Taxable Bases (NTLs) for large companies (for fiscal years starting on or after 1 January 2024)
Limits on the compensation of NTLs are reinstated for companies with a turnover of 20 million euros or more, with a compensation limit of 50%, and for companies with turnover exceeding 60 million euros, the limit will be 25%. Currently, the single limit is 70%.
- Limits on the compensation of NTLs (50%) in consolidated groups (for fiscal years starting in 2023, 2024, and 2025)
The measure introduced for 2023 will continue to apply for fiscal years starting in 2024 and 2025. Thus, the NTL obtained by a company in the tax group can only be compensated by 50%, with the non-deducted amount being integrated into the taxable base in the following 10 years.
- Reversal of impairment losses on equity investments in entities (for fiscal years starting on or after 1 January, 2024)
For fiscal years beginning on or after January 1, 2024, impairments of value declared as tax-deductible in years prior to 1 January, 2013, must be reversed. This reversal will be made in equal parts over the taxable base for the fiscal years 2024, 2025, and 2026.
- Capitalisation reserve (for fiscal years starting on or after 1 January, 2025)
For fiscal years starting on or after January 1, 2025, the reduction in the taxable base will be 20% of the increase in equity, with a limit of 20% of the taxable base for the fiscal year. The increase in equity must be maintained for 3 years. Increased percentages of reduction in the taxable base are set depending on the increase in the average workforce compared to the previous year.
It is worth noting that in 2024, the capitalisation reserve entitles to a reduction in the taxable base up to 15% of the increase in equity, with a limit of 10% of the taxable base for the year, and the period for maintaining the increase in equity is 3 years.
- Corporate Tax rates (for fiscal years starting on or after 1 January, 2025)
The tax rates applicable to companies with turnover below 1 million euros and for small entities (those with turnover below 10 million euros) are reduced.
For companies with turnover under 1 million euros, the first 50,000 euros will be taxed at a rate of 17%, and the remaining taxable base at 20%.
Small entities will be taxed at 20%.
These reduced rates do not apply to entities considered as property entities.
However, a transitional provision will apply to fiscal years starting in 2025, 2026, 2027, and 2028, so the reduction in tax rates will be gradual and will not reach its full amount until fiscal year 2029.
b) Regarding PIT
- Tax rates on savings income (for fiscal year 2025)
Starting from fiscal year 2025, the tax rates on savings income will be modified. The taxable base of savings exceeding 300,000 euros will be taxed at a rate of 30%, whereas the current rate for 2024 is 28%.
In this regard, it will be advisable to properly plan any potential advance distribution of dividends to individual shareholders before the year end. However, a previous analysis of the impact on Wealth Tax (WT) of the combined 60% limit of the PIT and WT quotas for WT purposes would be advisable.
Now, we must await the approval of this draft law by the Senate, which is expected to occur in the coming weeks.
