Impuestos sobre sociedades

Question 1

Nature of CIT (4)

Answer 1

Has 4 characteristics:

• Direct: taxes income= profit
• Personal: taxes corporations.
• Proportional: CIT increases when TB increases.
• Periodical: must be paid every year.

Question 2

Scope of application

Answer 2

Levied in all Spanish territory.

Question 3

Taxpayers (3)

Answer 3

• Legal entities that are tax residents in Spain:
• Subject to CIT on their worldwide income.
• Subject to CIT on all profits (ordinary/ extraordinary activities).

Question 4

Residence and tax domicile

Answer 4

Subject to CIT if meets ONE of following requirements:

• Entity incorporated under Spanish law.
• Corporate address is located in Spain.
• Place of effective management is in Spain.

Question 5

Exemptions of paying CIT

Answer 5

• Full exemptions: state, regional governments, local authorities, bank of Spain and public bodies.
• Limited exemptions: profits that derive from non- business activities: a) foundations and associations. b) partial exempt entities: trade unions, official chambers.

Question 6

How to determine TB

Answer 6

1. Direct estimation.
2. Objective estimation.
3. Indirect estimation.

Question 7

Direct estimation for TB

Answer 7

Company pays CIT on profits registered on books which must be adjusted under Spanish law.

Question 8

Objective estimation for TB

Answer 8

NOT departing from economic direct magnitude.

shipping entity pays depending on weight of boat

Question 9

Indirect estimation of TB

Answer 9

Exceptional situations when it’s impossible to estimate profits of a company.

Question 10

How will they be taxed?

Answer 10

Companies are taxed on profit.

• Obtaining profits before tax from ledgers.
• From profits we are going to perform adjustments.
• Different between accounting and tax criteria.

Question 11

Amortization/ Depreciation

Answer 11

• Book depreciation is tax deductible if reflects actual depreciation suffered by asset.
  Happens if ALL requirements are met:
  A) Depreciation is registered in books.
  B) Computed by certain criteria (percentage, etc).

Question 12

Freedom of depreciation regime

Answer 12

Following assets can be freely tax depreciated regardless of book depreciation:

• R&D expenses capitalized.
• Tangible and intangible assets only used for R&D (menos real estate).
• New tangible assets for an unit value less than 300 up to 25000.

Question 13

Non- Deductible Expenses (9)

Answer 13

Non- deductible and POSITIVE adjustment:

• CIT expense if it is income.
• Fines (except contractual fine).
• Contributions to own funds/ equity = DIVIDENDS.
• Gambling losses.
• Donations and gifts.
• Expenses related to tax havens.
• Tax surcharges (except late payment interest).
• Expenses incurred on customers (1% net revenues per year).
• Indemnities paid to employees.

Question 14

Depreciation

Answer 14

Special regime for assets bought with LEASING AGREEMENT:

• Financial lease agreement (regulated).
• Contract must include purchase option.
• Assets rented: real estate/ industrial facilities devoted to business activities.

Question 15

Impairments (deterioro de valor)

Answer 15

NOT DEDUCTIBLE 
except:
Bad debts: only deductible if 1 of following are met:
- 6 months elapsed since obligation was due.
- Debtor is under bankruptcy.
- Debtor is accused of fraud.
- Judicial claim has been filed.
- NON DEDUCTIBLE with 3rd parties.

Question 16

Provisions

Answer 16

General Rule: TAX DEDUCTIBLES
Except: non- deductible 
- Provision for long- term contributions to employees.
- Sales risk return.
- Restructuring.

Question 17

Financial expenses- Interest

Answer 17

Interest = TAX DEDUCTIBLE
Rule:
- Limit of deduction= 1 million.
- 30% of EBITA if is > a 1 million.

Question 18

Assessment on valuation rules: How do we value assets for tax purposes?

Answer 18

General rule: book value = tax value
- Modification of value does not impact tax value unless it is registered.
Only change value if we TRANSFER assets (valued at ARM’S LENGTH):
- Donations.
- Exchange of assets.
- Delivered through dissolutions, merger, splits, capital reduction.

Question 19

Related party adjustments

Answer 19

Related party: special relationship between shareholder that has more than 25% of company and actual company.
Obligations:
- valued at arm’s length.
- documentation prepared to prove it’s valuation at arm’s length.

Question 20

Tax allocation for income and expenses

Answer 20

• For CIT: income and expenses are included in TB. Si te tienen que pagar en 2 años igual pones en los books el gasto HOY.
• Expenses: deductible if registered in P&L, except freedom of depreciation.
• Special rule for deferred payments: at least 1 year elapses from transfer and last payment.

Question 21

Dividends and capital gains exemption

Answer 21

Company that obtains income/ dividends.
Dividends/ gains on transfer of subsidiary are exempt of:
- Have at least 5% of shares.
- Participation owned at least 1 year.
- Foreign companies: subject to at least 10% in its country or treaty.