SPAIN Law and Practice Contributed by: Raúl Salas and Elena Ferrer-Sama, RocaJunyent
All necessary expenses and costs connected to pro - ducing income may be deducted from gross income in order to arrive at a taxable income determination. Additionally, the Spanish CIT Law provides for cer - tain items that are never deductible (permanent differ - ences, such as penalties) or that are deductible in a different year (timing differences, such as differences between accounting depreciation and tax deprecia - tion). 2.2 Technology Investments There is currently a patent box system in Spain. In this respect, a partial exemption can be applied to the income obtained by entities from the transfer of the right to use or exploit certain assets (eg, patents, utility models, registered advanced software, and comple - mentary certificates for the protection of medicines, phytosanitary products and legally protected designs) that have been generated by the entity’s R&D and technological innovation activities. This partial exemp - tion can amount to a maximum of 60% of the income and can also be applied to capital gains generated from the transfer of the above-mentioned assets to third parties. If the transaction is carried out between related parties, the partial exemption will not apply. Furthermore, a tax credit is available for R&D activi - ties. The tax credit for carrying out R&D activities will be 25% of the R&D expenses incurred in the tax year and, if these expenses are higher than those incurred for the same concept in the two previous tax years, the deduction will be up to 42% of these expenses. In addition, the companies may apply a tax credit of 17% of the amount of the personnel costs for quali - fied researchers assigned exclusively to R&D activi - ties. There is also a tax credit of 8% on investments in fixed assets used exclusively for these activities. However, the tax credit for technological innovation activities will be 12% of the expenses incurred in the tax year related to this concept. 2.3 Special Incentives Spain has several tax incentives for the production and financing of movies and TV series that are totally or partially shot in Spain. The incentive could amount to EUR20 million (EUR10 million in the case of TV series).
The tax credit provided for these activities will be 40% of the total cost of production, as well as the costs of obtaining copies and the costs of advertising and promotion to be borne by the producer of the movie – provided that more than 50% of the cost of production corresponds to expenses incurred in Spanish territory. 2.4 Loss Relief Tax losses may be carried forward indefinitely, although any deduction is limited to 70% of the posi - tive taxable income before the application of the tax benefit for the capitalisation reserve and other specific items. Tax losses of at least EUR1 million can always be offset without limitation. Additionally, as of 2023, offset of current-year tax losses obtained by a com - pany in a tax group against tax profits of other entities in the group cannot exceed 50% of such losses. As of 2024, the CIT introduced additional limitations for large companies and tax groups. According to those limitations, when companies’ turnover in the 12 months prior to the commencement of the taxable period had reached: • EUR20 million, the offsetting of tax losses would have not exceeded 50% of the yearly taxable income before the capitalisation reserve and tax losses were offset; and • EUR60 million, the offsetting of tax losses would have not exceeded 25% of the yearly taxable income before the capitalisation reserve and tax losses were offset. As a final remark, the CIT Law provides anti-avoidance rules to prevent tax losses being utilised when there is a change in control. 2.5 Deduction of Interest As a general anti-avoidance rule, interest paid to a group entity incurred in order to acquire shares (when the seller is another group entity) or to increase equi - ty interests in other group members is wholly non- deductible – ie, tainted financial expenses – unless the operation might pass a business-purpose test. The remaining net finance cost (ie, the net amount of financial income and cost, excluding the above- mentioned tainted financial expenses) is deductible up
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