New tax measures on CIT prepayments for large companies

On 30 September the Spanish Government approved the Royal Decree Law 2/2016, of 30 September, containing tax measures aimed at reducing the public deficit, which will affect next CIT prepayments due on 20 October and 20 December 2016. This Royal Decree Law entered into force on 30 September 2016 and for an indefinite term.

The abovementioned tax measures refer to the CIT prepayment calculation and the re-establishment of a new minimum CIT prepayment, as we detail below.

According to these new measures, corporate taxpayers with a turnover exceeding EUR 10 million in the prior fiscal year will calculate their CIT prepayments applying an increased CIT prepayment rate of 24 per cent (as opposed to a 17 per cent rate applicable so far) over their taxable income of the on-going fiscal year. However, the amount of the resulting CIT prepayment will amount, at least though, to 23 per cent (25 per cent for credit entities and entities engaged in the exploration, research and exploitation of deposits and underground storage of hydrocarbons) of the accounting result of the first three, nine or eleven months of each calendar year (or, for taxpayers whose tax period does not coincide with the calendar year, of the accounting result of the year elapsed since the beginning of the tax period until the day before the start of each period of payment of the CIT prepayment).

For the purposes of calculating the minimum CIT prepayment, and in order to align its calculation base and the taxable income of the CIT, the following income, among others, shall be excluded from the accounting result:

• positive income derived from debt write-offs or debt deferrals as a result of an agreement with creditors of the taxpayer (however, that part of such positive income that is integrated into the taxable income of the tax period shall also be included in the accounting result); and
• positive income derived from debt capitalisations that is not integrated into the taxable income of the CIT.

It is also established that entities which are subject to reduced CIT rates (or to a zero per cent CIT rate) are not required to make a minimum CIT prepayment, such as the case of collective investment entities, pension funds, Spanish REITs or entities under the tax regime of non-profit entities.
It is noteworthy that in this Royal Decree Law, unlike previous regulations, those holding entities in which at least 85 per cent of their income is tax exempt, have not received a more benevolent treatment that involves a reduced minimum CIT prepayment taking into account that the vast majority of their income is exempt.

Finally, please note that this new regulation will not apply to those CIT prepayments whose payment period began before the entry into force of this Royal Decree Law (i.e. 30 September 2016).