How Will The Changes In Corporate Tax Affect Your Company?
The difficult economic situation that Spain is experiencing has resulted in intensive changes in corporate tax legislation for 2012. Here we offer a brief summary of these significant amendments, which should be taken into account when filing corporate tax for 2012, on 25 July 2013.
The Royal Law Decree (Real Decreto Ley) 12/2012 of 30 March provided the basis of these amendments through its revised text for Article 20 of Corporate Tax Law, which has introduced general limitations.
With respect to the deduction of financial expenses, this has been limited to 30 per cent of the company’s operative profit, as long as the net financial expenses exceed €1 million. As a consequence, a specific temporarily adjustment has to be made, which allows for excessive financial expenses to be tax deductible from future corporate profits.
Another major change is the limitation of deductions of goodwill (Fondo de Comercio) regulated in Article 12.6 and mergers’ goodwill regulated in Article 89.3, with both limited to one per cent per annum of the calculated deductible base.
Furthermore, the allowed deduction in corporate tax for 2012, for those activities that Article 44 refers to, has changed from 35 to 25 per cent and 60 to 50 per cent. This is also applicable to companies that decide to re-invest their extraordinary profits. As compensation for the lower percentages, the period of application of these allowances has been increased. For both, activities as per Article 44 and re-investments of extraordinary profits, the period has been changed from 10 to 15 years and 15 to 18 years for any pending balances as at the beginning of the 2012 financial year.
There are also changes with respect to freedom of depreciation of assets, which has been abolished. On the other hand, Royal Decree Law 18/2012 introduced an exemption of 50 per cent of the profits from urban real estate sale transactions that took place between 12 May and 31 December 2012.
It is also important to remember that Law 16/2012 grants companies the possibility of updating their balance sheets, resulting in fiscal optimisation. In addition, we should bear in mind that the corporate tax rate on profits of micro companies (defined as companies with net sales from core business less than €5 million and with an average employed workforce during the year of fewer than 25 employees) is 20 per cent for profit up to €300,000 and the rest is taxed at 25 per cent, provided they have maintained or increased their workforce during 2012.
There are also allowances for those companies that invested in professional training courses for their employees: i.e. one per cent of the investment deductible. This deduction should be reduced by 65 per cent of the amount of subsidy received, in the event the company obtained a subsidy related to training courses.
Although the changes introduced by Law 12/2012 are aimed at increasing government income to combat the current economic downturn in the country, companies that are properly advised can still minimise their tax charge by correctly applying all allowances and taking advantage of other available measures that can save them money.
Bashir Habbal
Legal Tax Consultant. AB Consulting
Tel. (+34) 952 766 464
bashir.habbal@ab-consulting.net
www.ab-consulting.net
