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Form 200. Corporate Income Tax Declaration 2018

11.4.1.3 Types of income to be included in the tax base

Section 2 of article 100 of the LIS establishes that taxpayers will allocate the total income obtained by the non-resident entity in Spanish territory, when it does not have the corresponding organization of material and personal means for its execution, even if the operations are recurring.

For these purposes, total income will be understood as the amount of the tax base that results from applying the criteria and principles established in the Corporate Tax Law, as well as in the remaining provisions related to this Tax for its determination.

This section will not apply when the taxpayer proves that the aforementioned operations are carried out with the material and personal means existing in an entity not resident in Spanish territory belonging to the same group, in the sense of article 42 of the Commercial Code, regardless of its residence and the obligation to prepare consolidated annual accounts, or that its constitution and operation responds to valid economic reasons.

However, in the event that the provisions of this section are not applied, the provisions of section 3 of the aforementioned article 100 of the LIS will be applied, according to which only the positive income obtained by a non-resident entity that comes from each one of the following sources:

  1. Ownership of rural and urban real estate or real rights that rest on them, unless they are affected by a business activity as established in the Personal Income Tax Law, or transferred for use to non-resident entities belonging to to the same group, within the meaning of article 42 of the Commercial Code, regardless of their residence and the obligation to prepare consolidated annual accounts, and they are also involved in an economic activity.

  2. Participation in own funds of any type of entity and transfer of own capital to third parties, in the terms provided in sections 1 and 2 of article 25 of Law 35/2006, of November 28, on Personal Income Tax Physical and partial modification of the laws on Corporate Taxes, on Non-Resident Income and on Wealth.

    Positive income from the following financial assets will not be included:

    • Those held to comply with legal and regulatory obligations arising from the exercise of economic activities.

    • Those that incorporate credit rights arising from contractual relationships established as a consequence of the development of economic activities.

    • Those held as a consequence of the exercise of intermediation activities in official securities markets.

    • Those held by credit institutions and insurance companies as a result of the exercise of their activities, without prejudice to the provisions of letter g) below.

    The positive income derived from the transfer of own capital to third parties will be understood to come from the performance of credit and financial activities referred to in letter g) of section 3 of article 100 of the LIS when the transferor and the transferee belong to a group. group of companies within the meaning of article 42 of the Commercial Code, regardless of residence and the obligation to prepare consolidated annual accounts, and the income of the transferee comes, at least 85 percent, from the exercise of economic activities.

  3. Capitalization and insurance operations, which have the entity itself as beneficiary.

  4. Industrial and intellectual property, technical assistance, movable property, image rights and leasing or subleasing of businesses or mines, in the terms established in section 4 of article 25 of Law 35/2006.

  5. Transfer of the assets and rights referred to in letters a), b), c) and d) above that generate income.

  6. Derivative financial instruments, except those designated to cover a specifically identified risk derived from the performance of economic activities.

  7. Credit, financial, insurance and service provision activities, carried out, directly or indirectly, with persons or entities resident in Spanish territory and linked within the meaning of article 18 of the Corporate Tax Law, insofar as they determine tax-deductible expenses in said resident entities.

It should be taken into account that only the income that is positive from each of the indicated sources will be included in the tax base. In no case will an amount greater than the total income of the non-resident entity be included.

To calculate the amount of positive income to be included in the tax base, the principles and criteria established in the Corporate Tax Law will be applied, and in the remaining provisions related to this tax for determining the tax base.

For these purposes, the exchange rate in effect at the end of the financial year of the non-resident entity will be used.

The amount of positive income to be included will be determined in proportion to the participation in the results and, failing that, in proportion to the participation in the capital, own funds or voting rights.

Finally, and in accordance with section 5 of article 100 of the LIS, in relation to international tax transparency and for the purposes of said article, it will be understood that the group of companies referred to in article 42 of the Commercial Code includes the multi-group and associated entities under the terms of commercial legislation.