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.
- Capitalization Reserve.
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.