4.2 Tax base

The tax base (BI) is the amount of income for the tax period less by the negative tax bases from previous years. The calculation of BI has particularities in tax regimes such as that of cooperatives or non-profit entities, among others.

According to the General Accounting Plan, the company's result is the difference between sales and income and purchases and expenses accrued in the year. To determine the BI, we start from the accounting result in the direct estimation method (the one applied generally).

Accounting expenses are, in general, tax deductible, however, the tax regulation indicates some non-deductible expenses which in general terms and qualifications are:

Those that represent a remuneration to own funds.
Those derived from accounting Corporation Tax.
Fines and penal and administrative sanctions, surcharges of the executive period and the surcharge for untimely declaration without prior requirement.
Gambling losses.
Donations and gifts.
Expenses of activities contrary to the legal system.
Expenses of services corresponding to operations carried out, directly or indirectly, with persons or entities resident in countries or territories classified as tax havens, or which are paid via persons or entities resident in them, except if the taxpayer proves that the accrued expense corresponds to an operation or transaction actually carried out.
Financial expenses accrued in the tax period, derived from debts with group entities according to the criteria established in article 42 of the Commercial Code, intended for the acquisition, from other group entities, of shares in the capital or own funds of any type of entities, or to making contributions to the capital or own funds of other entities in the group, unless the taxpayer proves that there are valid economic reasons for carrying out said operations.
Expenses deriving from the extinction of the employment relationship, common or special, or from the mercantile relationship referred to in Article 17.2.e) of Act 35/2006, or from both, even when they are paid in several tax periods, which exceed, for each recipient, the greater of the following amounts:
1. 1 million euros.
2. The obligatory amount established in the Workers' Statute, in its implementing regulations or, where relevant, in the regulation that governs the execution of rulings, without it being able to be considered as such if established by virtue of an agreement, covenant or contract. For these purposes, the amounts paid by other entities that are part of the same group of companies in which the circumstances provided for in article 42 of the Commercial Code occur will be computed.
Losses due to impairment of securities representing participation in the capital or equity of entities in respect of which any of the following circumstances apply:
1. that, in the tax period in which the impairment is recorded, the requirements established in article 21 of the LIS are met, or
2. that, in the case of participation in the capital or equity of entities not resident in Spanish territory, in said tax period the requirement established in letter b) of section 1 of article 21 of the is not met. LIS .
Decreases in value caused by application of the fair value criterion corresponding to securities representing shares in the capital or equity of entities referred to in the previous letter, which are allocated to the profit and loss account, unless , previously, an increase in value corresponding to homogeneous values of the same amount has been integrated into the tax base, where applicable.
The tax debt for the Tax on Property Transfers and Documented Legal Acts, Documented Legal Acts modality, notarial documents, in the case of loan deeds with mortgage guarantee in which the taxpayer is a lender.
Expenses that are subject to the deduction regulated in article 38 bis of the LIS will not be deductible, including those corresponding to the amortization of assets whose investment has generated the right to the aforementioned deduction. .

The adjustments are a consequence of the existing discrepancies between the accounting and tax standards. The adjustments make it possible to reconcile the accounting result with what is established in the rules that regulate the obtaining of the BI , and may be motivated by differences in the qualification, in the valuation or in the temporary imputation.

Before offsetting negative tax bases, the following reductions may be made, among others:

Reduction of income from certain intangible assets (Patent box):

The purpose of this reduction in the tax base is to stimulate the carrying out of activities to create technical knowledge with industrial or commercial application within the framework of an innovative activity, so that the exploitation of such knowledge through the transfer of its use to third parties or its Transmission has a special treatment consisting of integrating into the tax base of the transferring entity, or transferor, only a part of the income obtained in the assignment or its transmission.

With effect for tax periods beginning on or after January 1, 2018, positive income from the transfer of the right to use or exploit patents, utility models, complementary certificates of protection of medicines and phytosanitary products, legally protected designs and models, which derive from research and development activities and technological innovation, and registered advanced software that derives from research and development activities, will be entitled to a reduction in the tax base in the percentage resulting from multiplying the result of the following coefficient by 60%:
1. In the numerator, expenses incurred by the entity directly related to the creation of the asset, including those derived from sub-contracting with unassociated third parties. These expenses will increase by 30 percent, without, in any case, the numerator being able to exceed the amount of the denominator.
2. In the denominator, expenses incurred by the entity directly related to the creation of the asset, including those derived from sub-contracting and, if applicable, the acquisition of the asset.
In no case shall the aforementioned coefficient include financial expenses, repayments on properties or other expenses not directly related to the creation of the asset.

The above will also apply in the case of transmission of the intangible assets referred to therein, when said transmission is carried out between entities that do not have the status of related parties.

For the application of this reduction, some requirements regulated in the LIS must be met.

As of July 1, 2016, small modifications were established in the amount of the reduction, in the required requirements, intangibles whose income gives the right to a reduction, as well as the possibility of the affected income being positive or negative.

Finally, a transitional regime is regulated for the reduction of income from certain intangible assets of the taxpayer available before July 1, 2016.
Capitalization reserve:

For tax periods beginning in January 2015, the capitalization reserve was introduced in the Corporate Tax regulation with the purpose of encouraging companies to capitalize with the profits obtained, fiscally rewarding their non-distribution. Thus, this measure allows companies that pay taxes at the general rate or at the increased rate of 30% (credit institutions, as well as entities dedicated to the exploration, research and exploitation of underground hydrocarbon deposits and storage) to reduce the previous tax base of the tax period in the amount of 10% of the profits obtained in the immediately preceding tax period that are not subject to distribution in the tax period in which the tax base is reduced (increase in own funds), provided that the amount of such undistributed profits are maintained in the entity's own funds for a period of five years since the end of the fiscal year in which this reduction was made.

In order to be able to practice this base reduction, it is necessary to provide an unavailable reserve for a period of five years, for the amount of the reduction.

It is only possible to know the increase of own equity that has taken place in a tax period at the end of said period, whereby there has been an increase in the entity's reserves. The formal requirement to record a reserve in the balance sheet that is qualified as unavailable, with absolute separation and a specific description, will be understood as met, provided that the formal provision of said capitalisation reserve takes place during the period that has been legally established by trade regulations for the approval of the annual accounts, for the fiscal year corresponding with the tax period during which the reduction is applied.

For tax periods beginning on or after January 1, 2015, the negative BI , which has been subject to liquidation or self-assessment, of a tax period can be offset with the positive income generated in the tax periods following the one in which the negative BI originated without time limitation (in tax periods that began previously the term was 18 years).

The unlimited period applies to negative BI pending offset at the beginning of the first tax period beginning on or after January 1, 2015, regardless of the tax period in which it is incurred. would have generated such BI negatives.

With effect for tax periods beginning on or after January 1, 2016, the amount of compensation is limited to the following percentages based on the net amount of turnover during the 12 months prior to the date on which the tax period begins. tax period:

Less than €20,000,000: 70% (60% in 2016)
€20,000,000 to €60,000,000: 50%
More than €60,000,000: 25%

The maximum limit for compensation of negative tax bases is €1,000,000.

The aforementioned percentages are calculated with respect to the BI prior to the application of the capitalization reserve and to the compensation of the negative BI . However, the limitation does not apply in the following cases: minimum amount of €1,000,000, write-offs and holdings (the maximum limit of €1,000,000 does not apply), extinction of the entity, newly created entities and reversal of impairments.