Etiqueta: estrategia fiscal

Since January 2024, Spain has been applying a new minimum supplementary tax of 15%, which is a crucial measure in the era of economic globalisation. It is especially aimed at large multinational companies and its purpose is to guarantee a minimum level of taxation at a global level.

An international initiative to combat tax evasion

In fact, the implementation of this new tax is part of an international effort to combat tax evasion by large companies and to establish a fairer tax framework at the international level. 138 OECD countries have reached a pact that in the EU has materialised through the 2022 Directive that all Member States must apply since 1 January.

In Spain, the Tax Agency has configured this tax as a new tax that complements corporate income tax.

830 companies affected in Spain

The new supplementary tax will be levied both on multinational companies and their subsidiaries in Spain and on large national groups with a turnover of 750 million euros or more in at least two of the last four financial years and taxed at a rate of less than 15%.

It is estimated that the new tax affects a total of 830 companies in Spain, both national and international. The vast majority, 707, are foreign multinationals with subsidiaries in Spain. 113 are Spanish multinational companies of which 41 are taxed below 15% (at an average rate of 6.21%) and 109 have subsidiaries abroad that are also taxed below 15% (average rate of 5.14%). In addition, the supplementary tax also affects 10 national groups that are taxed at an effective average rate of 9.2%.

How it works

While corporate income tax is levied on the taxable base, this new supplementary tax is levied on the accounting result. In other words, income minus expenses.

However, the Draft Supplementary Tax Bill allows for adjustments to reflect «the significant permanent differences that typically exist in most tax systems between accounting profit and the tax base of a tax on corporate profits».

The supplementary tax is configured through two taxes:

• The primary supplementary tax. This is the general rule or income inclusion rule. It is levied on multinationals or large groups based in Spain whose subsidiaries abroad are under-taxed.
• The secondary supplementary tax. This is the closing rule or insufficiently taxed profits rule. It establishes that in the event that a company has a parent company in a country that does not have this complementary tax, «Spain, as the country of residence of the Spanish subsidiaries of that foreign parent company, has the right to collect the complementary tax corresponding to the Spanish subsidiaries».

Entry into force and derogations

We said at the beginning that the supplementary tax came into force on 1 January last. This is true for the primary supplementary tax. However, in the case of the secondary tax it will enter into force for tax periods starting from 31 December 2024.

Furthermore, the Treasury recognises the complexity of this new tax and for this reason foresees the exceptional case of being able to get rid of the tax during 2023 and 2026 if certain requirements are met in the information contained in the country-by-country report.

Nor will the tax be applied during the first five years to groups undergoing internationalisation or to companies with a turnover in excess of 750 million and which therefore become taxable under the new tax.

The Confianz tax consultancy team can help you avoid errors in the application of this tax.

Royal Decree 1007/2023, of 5 December (BOE of 6 December), approves the so-called Veri*Factu Regulation, the technical regulation that implements the provisions of Law 11/2021 on measures to prevent and combat tax fraud with regard to invoicing processes.

This regulation establishes the requirements to be adopted by the computer or electronic systems and programmes that support the invoicing processes of companies and the self-employed. All taxpayers must have computer systems adapted to the required characteristics and requirements in place by 1 July 2025. The only exception will be taxpayers who keep their books of records through the AEAT e-Office by means of the electronic supply of invoicing records (SII).

The transition from traditional to digital invoicing is a transition that requires careful planning. Because it involves allocating adequate technical resources, reorganising internal procedures and thorough staff training. In this article we explain the basic conditions to be met.

Objective of the Veri*Factu Regulation

The aim of the Veri*Factu Regulation is to ensure the standardisation of invoicing systems and software. It also prevents the alteration of invoices and simplified invoices once they have been issued.

IT resources required:

Taxpayers have several options for complying with the new obligations:

• A proprietary computer system. This must have a written declaration of responsibility issued by the manufacturer or developer certifying that the software and hardware comply with the standards. In addition, this declaration shall include a description of the computer system and the characteristics of the installation.
• A computer system shared between several taxpayers. Indeed, the only condition is that the invoicing records of each of them are differentiated and meet the requirements individually.
• In the future, the computer application that the tax administration may develop for this purpose.

Requirements for computerised invoicing systems

In addition, computerised invoicing systems should:

• Ensure the integrity, preservation, accessibility, readability, traceability, and unalterability of billing records.
• Have the capacity to send all invoicing records electronically to the Tax Administration. Provided that it is continuous, secure, correct, complete, automatic, consecutive, instantaneous and reliable.
• To have an event log that automatically records certain interactions with the computer system. Also operations performed with it or events occurring during its use.
• Locate access to any possible confidential non-patrimonial information in a dissociated manner. Thus, the tax administration will be able to directly access the consultation of invoicing and event records.

Invoice requirements 

In summary, each billing record or invoice should include:

• The tax identification number and name and surname, name or company name.
• The invoice number.
• The date of issue and the date on which the transactions documented therein were carried out.
• The type of invoice issued: full or simplified.
• The general description of the operations.
• The total amount of the invoice.
• Value Added Tax or other levies.
• Electronic signature.

Although it still represents a major challenge, especially for SMEs, e-invoicing is gradually spreading. In short: it is about to become the new standard for commercial transactions. Therefore, if you have any doubts about its implementation, the tax and commercial law specialists at Confianz can help you.

The Constitutional Court has just declared unconstitutional the modification of the Corporate Tax approved in 2016. And this decision opens the door to million-dollar claims by companies.

It should be borne in mind that the Treasury put the increase in tax revenue resulting from this modification, which has now been overturned, at 4.5 billion euros. Globalia alone suffered an additional 4.7 million euros in its first year of application. It is estimated that, in total, the Tax Agency is facing refunds of between 2 and 3 billion euros.

Because not all affected companies will now be able to apply for compensation. Only those that have kept the procedure open until now will be able to do so. A further demonstration that having a specialised tax consultancy can make a big difference.

Not all affected companies can claim

The Constitutional Court’s ruling imposes certain limits on companies’ claims. Tax obligations that have already been decided by a judgment or administrative ruling or that have not been challenged at the date of the ruling, or self-assessments whose rectification has not been requested at that date, may not be reviewed.

As we said, only the affected companies that have kept the proceedings open will now be able to request compensation. And even in open proceedings, the court decision will only affect the last four financial years unless the company has interrupted the statute of limitations.

In any case, most large companies have open proceedings, so they will be able to complain.

What was the modification of corporate taxation

The reform of the Corporate Income Tax that has now been declared unconstitutional was approved in 2016 by means of a Decree-Law by the Ministry of Finance then headed by Cristóbal Montoro. The aim was to limit the deductions from which large corporations benefited, but without modifying the nominal rates of 25%. The ultimate aim was to increase revenue in order to bring Spain closer to the public deficit reduction targets required by the European Union.

Three changes were made so that large companies in particular would have a larger tax base on which to apply the tax rate. These are the changes introduced by the Royal Decree-Law:

• It set more severe ceilings for the offsetting of tax losses for companies with a turnover of more than 20 million euros;
• It introduced a limit on the application of double taxation deductions;
• It made it compulsory to automatically include in the tax base any impairment of the value of tax-deductible holdings by fifths over five years.

The first two measures were only applicable to large companies, while the third one could affect any taxable person liable to this tax.

Why has it been declared unconstitutional

Following the approval of this reform, large companies began a legal battle. The National High Court raised a question of unconstitutionality and now the Constitutional Court has ruled that the approval of these measures through the royal decree-law violated article 86.1 of the Constitution.

According to the Constitutional Court, the royal decree-law cannot «affect the rights, duties and freedoms of citizens». According to established doctrine, this instrument is reserved for cases of urgent necessity and cannot alter either the general system or those essential elements of taxes that affect the determination of the tax burden, such as corporate income tax, which is a basic tax.

The regulation declared unconstitutional has been amended since its entry into force in 2017 and is therefore not currently being applied.

The National High Court has recently issued a ruling (Ruling 368/2023 of 11 January) that relaxes the conditions for companies to deduct the salary of their directors and administrators as a corporate tax expense.

The milimetre doctrine

Until now, the tax authorities often prevented the deduction of such salaries for various reasons, the most frequent being that the exact remuneration was not detailed in the company’s articles of association.

This was known as the «millimetre doctrine», which strictly required two conditions for companies to be able to deduct the costs of directors’ and managers’ remuneration:

1. That the bylaws expressly provide for the possibility of these positions being remunerated.
2. The exact amount of these salaries should be specified in the Articles of Association.

If these requirements were not met, the Administration understood that the amounts paid were not obligatory and therefore could not be deductible. However, this condition left out many companies. Because directors and board members occupy key positions and their remuneration often varies according to many variables, such as corporate performance.

It is no longer necessary to include the exact amount of such remuneration in the company’s articles of association

This is a legal disquisition that has been going on for a long time. In the past, the Supreme Court had already ruled that what is important is to demonstrate the reality of the service rendered, its effective remuneration and its correlation with the business activity. Now the Audiencia Nacional has ratified this position and has also expressly added that it is not necessary to include the exact amounts of the salary in the articles of association in order to consider it as a deductible expense.

It is sufficient to set a salary ceiling for the salary to be deductible

In the latter judgment of the Audiencia Nacional, the remunerated nature of the position was indeed stated in the articles of association. However, they did not specify the exact amount of the remuneration. It was limited to establishing that the remuneration of the directors would be determined at the general meeting and that the amount could never exceed 10% of the net profits of each financial year.

This practice of setting a percentage of profits as a limit is common in many companies. Now the Audiencia Nacional has interpreted the applicable commercial law in a more flexible manner to conclude that the Administration is applying an excessively rigid interpretation and that it is not necessary for the articles of association to specify a specific amount or a specific percentage. It is valid for the articles of association simply to set a maximum limit for the general meeting. Because in the end this greater flexibility benefits the shareholder.

What are the new conditions for deducting directors’ and administrators’ salaries as a corporate tax expense

What are the new conditions for deducting directors’ and administrators’ salaries as a corporate tax expense

Following this latest ruling by the Audiencia Nacional, the conditions for a company to be able to deduct the salary of directors and administrators from its corporate income tax are considerably more flexible. Two minimum requirements are sufficient:

• That the Board of Directors, which is the highest body of a Society, has not challenged this salary and decided that the member in question cannot receive it.
• That this salary has been correctly recorded in the accounts and can be supported by documents such as a bank statement.

In any case, it is advisable to carry out an individual analysis of each specific case in order to be able to assess the tax consequences. Although the courts are becoming increasingly flexible, it will be necessary to keep an eye on the evolution of their criteria.

In recent months, the Executive has launched a package of measures aimed at obtaining a greater tax contribution from large estates and companies. Among them we have already talked about the Solidarity Tax on Large Fortunes. Today we will talk about another far-reaching measure. This is the temporary reform of the tax consolidation regime that limits the offsetting of losses in groups of companies taxed under the tax consolidation regime.

What is the tax consolidation regime?

Introduced in 1995, the tax consolidation regime is a special tax regime based on the tax group as the sole taxpayer or taxpayer of the tax, rather than the individual entities that make up the group.

With it, corporate tax is calculated on the basis of the consolidated taxable income of the tax group. That is: the sum of the individual tax bases of all the entities that make up the group. Most commonly, with this calculation, the tax losses that may be recorded by some companies in the tax group during the year can be offset against the taxable profits generated by the rest of the companies in the group.

This advantage disappears with the new temporary rule which, according to the Ministry of Finance and Public Administration, could affect 3,609 companies this year.

What changes with the new temporary reform of the tax consolidation regime?

The use of loss compensation is reduced by half

The way in which the taxable base of tax groups is calculated changes. In 2023 it will be determined by the sum of 100% of the positive tax bases and, this is the novelty, only 50% of the negative tax bases.

50% of the negative bases may be integrated in the following 10 financial years

Tax losses not included in the tax base in 2023 can be included in equal parts in the following ten tax periods. In other words, their full recovery is delayed to the period between 2024 and 2033, a period of 10 years.

Moreover, the recovery of the amount not deducted must be carried out by the group itself. In this way, companies that could leave the group in the coming years are prevented from using their tax loss carryforwards that have not been used in 2023. This breaks with the general criterion applied until now. Prior to this reform, entities leaving a group were entitled to take any unused tax credits they had generated.

In cases of termination of the group, the amount pending recovery may be included in the consolidated tax base of the last tax period in which the group is taxed under the consolidated tax regime.

Consequences of the new tax consolidation regime

In practice, this reform will mean a tax increase for groups generating tax losses in 2023. Among the most affected will be many venture capital investment structures. Because in this sector the creation of holding companies is common, in which the acquisition debt associated with leveraged buyout operations is placed.

On the other hand, the new system of linear recovery over ten years of amounts not deducted could favour certain tax groups wishing to accelerate their loss recovery schedule.

How to act now

It is therefore time to analyse the impact that the reform will have on our tax groups and to consider what possibilities we have to mitigate the possible negative effects. These are two of the strategies we could put in place:

• Undertake corporate restructuring operations aimed at a greater distribution of profits among the different companies of the tax group.
• Allocate the acquisition debt in holding companies to the operating subsidiaries generating positive tax bases.

At Confianz we can help you plan the best way to deal with the temporary reform of the tax consolidation regime affecting loss relief in 2023.

On 22 December 2022, the new directive establishing a global minimum taxation threshold for large companies  was published in the Official Journal of the European Union. Its objective is to establish a minimum level of international taxation for multinationals. To this end, it establishes a framework of rules that foresees that, when the effective rate in a country is lower than 15%, an additional or complementary tax is levied.

The OECD estimates that this major development in international taxation will raise 220 billion euros globally.

Which companies will be affected

Council Directive (EU) 2022/2523 will apply to those corporate groups with a presence in the European Union (EU) whose annual revenues have been equal to or greater than EUR 750 million in at least two of the previous four financial years. This includes ultimate parents, intermediate parents and subsidiaries resident in the EU.

When will the minimum tax directive enter into force

This directive will have to be transposed into Member States’ legislation during 2023, in order to start applying the income inclusion rule from 1 January 2024. The under-taxed profits rule will start to apply from 1 January 2025.

How the 15% minimum tax will be paid

Income inclusion rule

The ultimate EU-resident parent of the group must pay the additional tax of the parent itself and of any of its subsidiaries, whether resident in the EU or not, where both are taxed at a rate of less than 15%.

Under-taxed profits rule

In some situations the income inclusion rule cannot be applied. For example, where the jurisdiction in which the parent is located does not provide for it. In these cases it will be the intermediate parent entities or EU resident subsidiaries of the group that will have to pay the supplementary tax.

Complementary national taxes

In addition, the directive allows Member States to adopt domestic taxes to ensure a minimum taxation of 15% for companies located in their jurisdiction. These domestic top-up taxes will be deducted from the overall top-up tax of the group.

This is how the effective tax rate will be calculated

The calculation of the effective group tax rate is a complex operation.

First, the effective tax rate is measured in each jurisdiction separately. To determine the effective tax rate, the adjusted covered taxes are divided by the eligible profits and losses.

The adjusted hedged taxes correspond to corporate income tax, albeit with some corrections. For example, in jurisdictions where the nominal tax rate is higher than 15%, deferred tax assets and liabilities are recalculated at 15%.

Eligible profits and losses are calculated on the basis of the profit and loss account used to prepare the consolidated financial statements. Adjustments are made to this accounting magnitude to eliminate income or expenses that are usually excluded from the tax base for corporate income tax purposes according to the different regulations in the various countries. For example: qualified dividends, impairment of fixed assets, expenses for illicit payments or penalties…

Consequences in Spain

These new rules should not have a major revenue impact in Spain, given that there is already a domestic minimum taxation rule that already puts the effective corporate rate, in general, above 15%.

However, some groups could be affected, since in some cases it is still possible today to be taxed below 15%. This is the case for companies under special tax regimes or applying double taxation deductions.