Nov 28, 2024 | Tax Flash
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.
Nov 19, 2024 | Tax Flash
Our VAT specialists have prepared a portfolio on the proposal for the Council Directive concerning VAT in the digital age (ViDA) that highlights a series of significant changes in VAT regulations to be implemented progressively until 2035. Following the Directive’s approval, likely in 2025, member states will be able to require the mandatory issuance of electronic invoices for transactions carried out within their territory and allow their use without the recipient’s acceptance. A significant change is introduced from 1 January 2027, where platforms facilitating supplies of goods within the Community by non-EU suppliers to other taxable persons will be considered as the suppliers of the goods.
Moreover, the deemed supplier provisions are extended to digital platforms that facilitate the short-term accommodation rental and passenger transport services.
By 1 July 2030, the concept of an electronic invoice will be formally defined, which must comply with a European standard, although the use of other standards for specific transactions will be permitted. Additionally, Digital Reporting Requirements are introduced, which will require both suppliers and recipients to declare certain transactions electronically to the tax authorities in real time. These measures aim to modernise and adapt the common VAT System to the needs of the digital economy, simplifying processes and ensuring tax compliance in the transaction of community goods.
For more information about this update, you can contact Fernando Matesanz and Ana González, heads of our VAT Department.
Nov 14, 2024 | Tax Flash
The Supreme Court, in its decision dated 15 July 2024, has confirmed the rejection of a refund for VAT incurred in 2011 to a European Union company not established in Spain, due to the late filing of the refund request in 2014, i.e., once the deadline for filing the application had expired (30 September 2012).
The ruling underlines the importance of meeting legal deadlines for requesting VAT refunds, which do not infringe the principles of equality, non-discrimination, and equivalence.
Therefore, we remind you that the VAT refund application must be submitted before 30 September of the year following the fiscal year; hence, the final deadline to request a refund of VAT incurred in 2023 by EU companies not established in Spain is 30 September 2024.
Access the full decision HERE
Nov 12, 2024 | Tax Flash
The DGT, in two binding consultations of 22 May 2024, has established the following criteria for whether the leasing of tourist accommodation is, or is not, exempt from VAT:
- In consultation V1099-24, relating to a case where the leasing company also provides cleaning services, change of bed linen and towels, concierge, luggage storage, reception open all year round, taxi booking, tourist information, document printing, and 24-hour multilingual customer service, the DGT considers that the lease is not exempt from VAT, and should apply the 10% rate, as it is providing hotel industry services.
- On the other hand, in consultation V1096-24, referring to a lessor who only provides 24-hour telephone assistance and support during the stay, the DGT considers that these are not hotel industry services and, consequently, the lease is exempt from VAT.
Access these binding consultations HERE
Nov 6, 2024 | Tax Flash
Below, we summarize some of the amendments proposed by the Socialist Parliamentary Group to be incorporated into Law 27/2014 on Corporate Income Tax.
The first three amendments listed below, if approved, address issues previously declared void by the Constitutional Court and will take effect for fiscal years starting from January 1, 2024. The fourth amendment, related to the capitalization reserve, will apply to fiscal years beginning on or after January 1, 2025.
- Limits on the compensation of tax losses applicable to Large Companies.
Limits on tax losses compensation are being reinstated for companies with a turnover equal to or greater than €20M. A compensation limit of 50% is set for companies with a turnover exceeding €60M, where the limit will be 25%. Currently, the universal limit is 70%.
- Limits on tax losses compensation of 50% in Consolidated Groups.
Limits on tax losses compensation would be reinstated for companies (and groups) with a turnover over €20M. For those companies, the compensation limit would be 50% of the taxable income, while for companies with a turnover exceeding €60M the limit would be 25%. Currently, the general applicable limit is 70%.
- Reversal of Impairments on the investment in subsidiaries.
Impairment losses previously declared as tax-deductible before January 1, 2013, must be reversed in equal parts in the taxable income for the fiscal years 2024, 2025, and 2026.
For fiscal years starting on or after January 1, 2025, the reduction in taxable income will be 20% of the increase in equity, with a limit of 20% of the taxable income for the fiscal year. The equity increase must be maintained for a period of 3 years.
For the fiscal year 2024, the capitalization reserve can be funded at 15% of the equity increase, with a limit of 10% of the taxable income for the fiscal year, and the equity increase must also be maintained for a period of 3 years.
We will keep you informed about the progress (and expected approval) of these measures.
Jul 25, 2024 | Tax Flash
It has been published, as a transposition of Council Directive (EU) 2022/2523, of December 14, 2022, relating to the guarantee of a global minimum level of taxation for groups of multinational companies and large national groups in the Union, a Draft Law to establish a Complementary Tax to guarantee a global minimum level of taxation of 15% for said entities.
This Draft Law involves following the recommendations of what is known as Pillar 2 of the OECD BEPS program, an initiative that seeks to fight against the erosion of the tax base and the shifting of profits, to which the Member States have adhered and which was integrated into the aforementioned Directive.
This rule will allow the establishment of a global minimum rate of 15% for multinational groups or large national groups. Specifically, it will apply to those with a net amount of their consolidated turnover equal to or greater than 750 million, according to the consolidated financial statements of the ultimate parent entity in at least two of the last four immediately preceding years.
The configuration of the Complementary Tax is based on three expressions:
- The national complementary tax. Its main purpose is to guarantee that entities located in Spanish territory achieve a minimumtax rate of 15% in Spain.
- Primary complementary tax. In this case, the tax will be applied when the parent company of a multinational group located in Spainobtains income from foreign subsidiaries, which are considered entities with a low tax level, as they bear an effective tax rate of less than 15%, when the jurisdictions in which they are located would not have implemented an admissible national complementary tax.
- Secondary complementary tax. It acts as a closure system and is activated when some of the multinational group companies have obtained income abroadthat has not been taxed at 15%. The difference between the primary tax and the secondary tax is that the latter does not fall on the parent company, but on subsidiaries of the group located in Spain.
The tax will come into force retroactively from January 1, 2024, and will accrue the last day of the tax period, coinciding with the fiscal year of the group’s ultimate parent company. However, the first informative declaration on the Complementary Tax and the communications will be presented to the Tax Administration at the latest on June 30, 2026, and the maximum deadline to submit the first tax declaration will be July 25, 2026.
Should you need further information please do not hesitate to contact us.
Access to the full Draft Law HERE
