Dividends are subject to Spanish Corporate Income Tax at the normal rate (25%) except in the following cases:
- Parent company regime: dividends received by Spanish parent companies (i.e., companies incorporated in Spain and holding qualifying shares that represent at least 5% of the stake of a subsidiary during, at least, one year) are exempt from Corporate Income Tax. In case of foreign subsidiaries, they should be subject to and non exempt from an identical or similar tax to the Spanish Corporate Income Tax (personal and direct tax), at a nominal tax rate of at least 10% (this requirement would be deemed to be automatically met if Spain has signed a double tax treaty with the other jurisdiction concerned). 5% of the dividends net amount must be added back to the parent company’s taxable results. Therefore, the effective tax rate on such dividends is 1.25%
- Consolidated group regime: dividends received by a Spanish company from a member of a consolidated group are not subject to Corporate Income Tax; 5% of the dividends net amount must be added back to the company’s taxable results. Therefore, the effective tax rate on such dividends is 1.25%.
Capital gains derived from the sale of fixed assets by Spanish companies are subject to Corporate Income Tax at the standard rate of 25%.
Capital gains derived from the sale of qualifying shares (i.e., 5% of subsidiary’s stake at the latest) that have been held for at least one year, are exempt from Spanish Corporate Income Tax; 5% of such gain must be added back to the parent company’s taxable results. Therefore, the effective tax rate on such gain is 1.25%
Net financial expenses are generally deductible for Spanish Corporate Income Tax purposes up to a limit of 30% of the adjusted EBITDA.
Notwithstanding the above, a minimum cap amounting to EUR 1m per year could be deducted in any case (except if the fiscal year is shorter than a calendar year, in which case it should be apportioned).
Net financial expenses that are not deductible because of exceeding the 30% limit on the EBITDA may be deducted in the following tax periods without any time limit. Additionally, if they fall below the 30% ceiling and the corresponding basis for additional deduction of interest expenses remains unused over the corresponding tax year, that difference will increase the ceiling of the deductible financial expenses over the subsequent five fiscal years.
Under the Spanish Corporate Income Tax consolidation group regime, this deductibility limitation of the 30% of the operating profit is calculated at the level of the group, and not individually for each of the companies (i.e., both the net financial expenses and the operating profit of the group must be considered).
In addition, only EUR 1m would apply as minimum threshold, regardless of the number of entities in the tax group.
Other limitations to the deductibility of financial expenses could arise under certain circumstances (e.g., anti-LBO rules).
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