4.2.25 Codes 00337 and 00338 other non-tax deductible provisions (Art. 14 LIS) not affected by Art. 11.12 LIS

Article 14.2 of the LIS establishes that expenses related to long-term remuneration of staff through defined contribution or defined benefit systems will not be deductible.

However, contributions to cover contingencies similar to those of pension plans will be deductible, as well as contributions made by the sponsoring companies provided for in Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003, provided that they meet the requirements set out in Article 14.2 of the LIS.

Likewise, article 14.3 of the LIS establishes the non-deductibility of other expenses associated with provisions:

1. Those derived from implicit or tacit obligations.

2. Those concerning the costs of fulfilling contracts that exceed the economic benefits expected to be received from them.

3. Derivatives of restructuring, except if they refer to legal or contractual obligations and not merely tacit ones.

4. Those relating to the risk of sales returns.

5. Those of personnel that correspond to payments based on equity instruments, used as a formula for employee remuneration, and are paid in cash.

Finally, Article 14.4 of the LIS establishes the deductibility of expenses corresponding to environmental actions, provided that they correspond to a plan formulated by the taxpayer and accepted by the tax authorities.

However, according to the provisions of article 14.5 of the LIS, these expenses are not deductible, either because the regulations establish it that way. or because they have not met the requirements set out in the standard, they will be deductible in the tax period in which the provision is applied or the expense is allocated to its purpose.

Therefore, this difference between the accounting criteria and the tax criteria on the deductibility of these expenses gives rise to the following adjustments in keys [00337] and [00338] "Other provisions not tax deductible (art. 14 LIS) not affected by art. 11.12 LIS" on page 12 of form 200:

• In the tax period in which non-deductible expenses are recorded, the taxpayer must include their amount in key [00337] of increases to the result of the profit and loss account.

• And in the tax period in which the provision is applied to its purpose, the taxpayer must include in the [00338] reduction key, the amount corresponding to said expenses.

In addition to the expenses and provisions mentioned in the previous sections, article 14.7 of the LIS establishes that expenses related to technical provisions made by insurance entities will be deductible up to the amount of the minimum amounts established by the applicable regulations. Within the same limit, the amount of the allocation in the year to the stabilization reserve will be deductible in determining the tax base, even if it has not been included in the profit and loss account. Any application of such reserve shall be included in the tax base of the tax period in which it occurs.

In application of this precept, the amount of expenses related to technical provisions made by insurance entities, as well as the amount of the allocation in the year to the stabilization reserve, which exceed the limit of the minimum amounts established by the applicable regulations, must be recorded in code [00337]. Likewise, in the tax period in which insurance entities apply said reserve, they must record its amount in code [00338].

In the event that the amount of the allocation in the year to the stabilization reserve has not been integrated into the profit and loss account, it will be deductible up to the aforementioned limit, so the amount of the allocation up to the limit must be recorded in key [00338]. In the tax period in which the application of said reserve occurs, this amount must be recorded in code [00337].

Finally, article 14.9 of the LIS establishes that the expenses inherent to the risks derived from repair and revision guarantees will be deductible up to the amount necessary to determine a balance of the provision not exceeding the result of applying to the sales with guarantees in force at the end of the tax period the percentage determined by the proportion in which the expenses incurred to face the guarantees in the tax period and in the two previous ones in relation to the sales with guarantees made in said tax periods were found.

The provisions of the preceding paragraph shall also apply to provisions for covering incidental expenses for sales returns regulated in article 14.3.d) of the LIS.

Therefore, taxpayers must make a positive adjustment in code [00337] for the amount of those expenses that are not deductible because they exceed the amount established in said provision.

In relation to these expenses for provisions of article 14 of the LIS, it should be remembered that both in the keys [00335] and [00336] "Expenses and provisions for pensions not affected by art. 11.12 LIS (arts. 14.1, 14.6 and 14.8 LIS)», as in keys [00337] and [00338] «Other non-tax deductible provisions (art. 14 LIS) not affected by art. 11.12 LIS», only the amounts relating to said expenses that are not affected by the limit established in article 11.12 of the LIS must be recorded. If they were affected by this limit, their amount would be recorded in keys [00415] and [00211] "Impairment losses under art. 13.1 LIS and provisions and expenses (arts. 14.1 and 14.2 LIS) referred to in art. 11.12 and DT 33.1 LIS».