SPAIN Law and Practice Contributed by: Raúl Salas and Elena Ferrer-Sama, RocaJunyent
to an amount equal to 30% of the operating profit. The definition of operating profit in accounting is similar to EBITDA, minus the effect of: • the amortisation of fixed assets; • the subsidies for non-financial fixed assets and others; and • the depreciation for impairment of fixed assets, as well as the gains or losses derived from the trans - fer of fixed assets. The resulting amount should be increased with divi - dends derived from entities when the stake represents at least 5% of their share capital. This rule will not apply to dividends from subsidiaries that have been acquired from other companies of the group, with group debts generating the tainted non-deductible financial expenses referred to previously. Any income, costs or profit that are not part of the taxable income (ie, permanent or timing difference) should be exclud - ed from the EBITDA. A net financial cost greater than 30% of the operat - ing profit could be carried forward and deducted in the following tax years (with no term limitation), within the same limit of 30% of the annual operating profit. Conversely, if the net financial cost is below 30% of operating profit (eg, capacity excess), such excess of capacity may be carried forward to deduct more financial cost in the following five years. The aforementioned limitation (30% of the operating profit) does not apply when: • the net financial cost does not exceed EUR1 mil - lion; or • the borrower is either an insurance or financial entity. In the case of entities belonging to a tax unit or tax consolidation group, all these calculations (net finan - cial cost, operating profit, etc) would be referred to the whole tax group. 2.6 Consolidated Tax Grouping The Spanish CIT Law allows Spanish tax-resident companies and Spanish permanent establishments (PEs) belonging to a Spanish or multinational group
to be taxed as a single group and, therefore, to apply a special tax-consolidation regime for CIT purposes. In order to apply this regime, the main requirements are as follows: • the Spanish companies should be owned – directly or indirectly – by the same parent company (either resident or non-resident); • the parent company (either resident or non-resi - dent) of the tax group must hold a direct or indirect minimum holding of 75% (70% for quoted compa - nies) and the majority of voting rights in the Span - ish companies must belong to the group; • the above-mentioned participation should be main - tained throughout the whole taxable period; and • the parent company cannot be tax-resident in a tax haven. The tax consolidation regime follows a number of basic rules. The taxable income results from the sum of all the taxable incomes of each Spanish tax-resi - dent company in the tax group, adjusted as outlined in the following points. • Participation exemption (ie, dividends and capital gains) is not affected by the tax consolidation tax grouping. • Current tax losses of any of the companies in the tax group can be offset against any company’s cur - rent tax profits – but, as of 2023, only up to 50% of such losses. • Tax profits (other than intra-group dividends) gen - erated from intra-group transactions are deferred and are only included in the consolidated taxable income when: (a) they are carried out with third parties; (b) one of the intra-group companies that is part of the transaction ceases to form part of the group; and (c) the consolidation regime is no longer applied. • Specific limitations apply concerning the offsetting of tax losses or the application of tax credits gen - erated by the group companies before they formed part of the tax group or joined the group. • No withholding applies on payments made at intra- group level.
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