Article supplied by Welex
The time limit for compensating negative company tax bases in Spain, generated by losses from previous years, has been changed drastically with the introduction of law 27/2014.
These tax bases will be applied without any time limit in the future. In other words, negative tax bases generated since 1997 may be compensated from now onwards. Congratulations!
There is a quantity limit of 70 per cent of the tax base prior to compensation. However, a compensation of 100 per cent is allowed if the minimum amount is €1 million.
It is important to be able to provide the tax office with certain accountancy documents, such as:
• Issued invoices
• Received invoices
• Bank extracts and payment receipts
This is because administration authorities have a period of 10 years to verify if compensation of negative tax bases is applicable or not.
In order to avoid the purchase of non-active companies or quasi non-active companies with negative tax bases, a series of limitations is being registered, and these must be taken into account.
Negative tax bases cannot be taken into account at the time of the purchase if one of the following situations occurs:
1. No economic activity has been registered during the three months prior to the purchase.
2. The company will carry out a different or additional economic activity (from the previous one) in the two years after the purchase.
3. The company is an equity entity, the so-called “Entidad Patrimonial”.
4. The entity was deregistered from the entities’ registry due to not having filed a return during three consecutive tax periods.