Changes to corporate income tax prepayments (RDL 2/2016)
Changes to corporate income tax prepayments (RDL 2/2016) Tax Alert
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Changes to corporate income tax prepayments (RDL 2/2016) Royal Decree-Law 2/2016, of 30 September 2016, introducing tax measures aimed at reducing the public deficit (hereinafter “RDL 2/2016” or “RDL”), was published in the Official State Gazette of 30 September 2016, together with Order HAP/1552/2016 of 30 September 2016, adapting tax self-assessments in respect of corporate income tax prepayments (forms 202-222) to the new regulations. As with all Royal Decree-Laws, the above must be rubber-stamped within 30 days. Faced with Spain’s growing public deficit and a decline in tax revenues, the interim government has introduced an extraordinary corporate income tax (CIT) measure, essentially aimed at raising funds. It is expected to do so to the tune of some Euros 8,300 billion this year alone. The main new development lies in an increase in the CIT prepayments required of companies with revenues exceeding Euros 10 million and, having entered into force on 30 September 2016 (the day on which it was published in the Official State Gazette), it will take immediate effect, applying to the payments on account of corporate income tax due during the first twenty (20) days of October. The RDL introduces a minimum amount for certain prepayments made according to the method provided for in article 40.3 of Corporate Income Tax Law 27/2014 of 27 November 2014 (CIT Law), and increases the rate applicable to this payment method. Note first of all that the amendment applies to corporate income taxpayers making CIT prepayments according to the method provided for in article 40.3 of the CIT Law whose tax periods began on or after 1 January 2016 and have revenues of at least Euros 10 million in the twelve (12) months leading up to the 2016 tax period.
At all times, regard should be had to three key points: –– The changes affect taxpayers making prepayments
according to the so-called “running-tax-base” method, i.e. per article 40.3 of the CIT Law. This method is either chosen by taxpayers themselves, or, in the case of taxpayers with revenues exceeding Euros 6 million in the twelve months preceding the date on which the relevant tax period commences (in this case the RDL only affects those with revenues exceeding Euros 10 million), it is mandatory. –– The concept of “net revenues”-turnover (Importe
neto de la cifra de negocios) is defined in commercial legislation as the sum of revenues from sales and services rendered or other revenues from ordinary
activities pursued, less any allowances and other sales-related relief, VAT and any other applicable taxes directly related to turnover (Spanish National Chart of Accounts and Resolution of the Spanish Accounting and Auditing Institute of 16 May 1991). –– “Net revenues” refers to individual net revenues,
meaning that each entity must calculate its revenues without taking into account the corporate group to which it belongs. The same cannot be said of tax consolidation groups, in which this should be calculated at group level, as it is the Group as a whole that is considered taxpayer. The RDL ushers in the following changes:
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Changes to corporate income tax prepayments (RDL 2/2016)
The RDL ushers in the following changes:
Prepayments according to the method provided for in article 40.3 of the CIT Law –– For taxpayers that calculate their CIT prepayments
based on the “running-tax-base” method provided for in article 40.3 of the CIT Law, the applicable rate is obtained by multiplying the rounded-up tax rate by 19/20, (giving a rate of 24% for entities taxed at 25% and 29% for those taxed at 30%). The ratio of 5/7 provided for in the CIT Law, which applied to the prepayment for April, is therefore increased.
Minimum prepayments 1. The RDL provides for a minimum amount, which is intended as a reference where the amount obtained using the “running tax base” method (article 40.3 CIT Law) is lower. This minimum prepayment is set at 23% of profit per the income statement (positive accounting result) for the first 3, 9 or 11 months of each calendar year, less the amount of any prepayments made previously for the same tax period. Taxpayers whose tax periods do not coincide with the calendar year must apply this minimum according to a special rule, based on the profit per the income statement for the part of the year running from the start of the tax period until the day before the commencement of each payment period for the purposes of prepayments. 2. In the case of credit institutions, and entities taxed according to the special regime for the prospecting, investigation and exploitation of hydrocarbon fields and underground deposits (oil companies), the above percentage is increased to 25% as a result of their higher nominal corporate income tax rate. 3. Where they have been included, the following items should excluded from the profit referred to in the preceding two points: –– Income from debt restructuring or deferral transactions
as a result of arrangements with creditors, including in such result the portion of the amount thereof that is included in the tax base for the period.
–– The amount of any income obtained on capital or equity
increases performed by means of the conversion of debt to equity, which is not included in the tax base by virtue of article 17.2 of the CIT Law; and –– Exempt income of entities taxed under the special
regime for partially exempt entities (title VII, chapter XIV of the CIT Law) –– Income qualifying for relief where article 34 of the
CIT Law applies (allowance for the provision of local public services). 4. The above minimum prepayment amount does not apply to the following entities: –– Those subject to the special tax regime provided
for in Law 49/2002 of 23 December 2002, on the tax regime governing not-for-profit entities and tax incentives for patronage. –– Those which, per sections 4 and 5 of article 29 of the
CIT Law, are subject to zero taxation or are taxed at 1% (UCITs, pension funds, etc.). Bear in mind that these entities are not required to make prepayments or even file the relevant tax returns. –– REITs (SOCIMIs)
Finally, we would draw your attention to the Preamble to the above RDL, which expressly and in no uncertain terms provides as follows: “These changes will bring about an immediate boost to public funds, a process that is to be overseen by the tax authorities”.The upshot of all of this is that the October CIT prepayment for entities affected by the reform will need to be prepared with particular care, as an inspection could give rise to penalties, even where the final self-assessment for the tax is prepared and results in a tax refund. At KPMG Abogados we are able to help you with any matter relating to the effects of this new Law. Please do not hesitate to contact your regular team of professionals should you wish to discuss any of these matters.
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