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Practical manual for Income Tax 2023.

Allocation of income from Spanish and European economic interest groups and temporary business unions

Regulations: Articles 43 to 47 LIS

Scope

The special regime for imputation of income is applicable to the following entities:

  • Spanish Economic Interest Groups regulated by Law 12/1991, of April 29, on Economic Interest Groups.

  • European Economic Interest Groupings regulated by Regulation EEC/2137/1985, of July 25, of the Council.

  • Temporary Business Associations regulated by Law 18/1982, of May 26, on the Tax Regime of Groups and Temporary Business Associations and Regional Industrial Development Companies, which are registered in the Special Registry of the Ministry of Finance.

Contents of the special regime

The special features of this special tax imputation regime are the following:

a. Entities to which this regime applies are subject to Corporate Tax, except for the payment of the tax debt for the part of the taxable base attributable to shareholders resident in Spanish territory.

b. The imputation to partners resident in Spanish territory or non-residents with a permanent establishment in the same includes the following concepts:

  • Net financial expenses that, in accordance with article 16 of the LIS , have not been subject to deduction in these entities in the tax period. Net financial expenses charged to partners will not be deductible by the entity.

  • The capitalization reserve that, in accordance with the provisions of article 25 of the LIS , has not been applied by the entity in the tax period. The capitalization reserve that is attributed to its partners cannot be applied by the entity, unless the partner is a taxpayer of IRPF .

  • The taxable bases, positive (reduced or increased, where appropriate, in the equalization reserve referred to in article 105 of the LIS ) or negative, obtained by these entities. Negative tax bases attributed to partners will not be offset by the entity that obtained them.

  • The bases for the deductions and bonuses in the fee to which the entity is entitled. The bases of the deductions and bonuses will be integrated into the liquidation of the partners, reducing the quota as appropriate by applying the rules of the Personal Income Tax or the Corporate Tax, depending on whether the partner is a taxpayer, respectively, of the aforementioned taxes.

  • The withholdings and payments on account corresponding to the entity.

The reserve for leveling tax bases referred to in article 105 of the LIS will be added, where appropriate, to the tax base of the economic interest group.

c. The imputations of the concepts discussed above will be made according to the following criteria:

  • When the partners or member companies are entities subject to this regime, on the date of completion of the tax period of the entity subject to this regime.

  • In other cases, in the following tax period, unless it is decided to do so continuously on the same date as the end of the tax period of the entity subject to this regime. The option will be expressed in the first IRPF declaration in which it is to take effect and will remain in effect for three years.

d. Dividends and profit shares that correspond to partners who must bear the imputation and come from tax periods during which the entity was in the present regime, will not be taxed by Personal Income Tax or by Corporate Tax. Its amount will not be included in the acquisition value of the shares of the partners to whom it was attributed. In the case of partners who acquire shares after the allocation, their acquisition value will be reduced by said amount.

e. In the transfer of shares in the capital, equity or results of these entities, the acquisition value will be increased by the amount of the company profits that, without effective distribution, would have been attributed to the partners as income from their shares in the period of time between their acquisition and transfer.

Furthermore, in the case of shares in Temporary Business Associations, the acquisition value will be reduced by the amount of the social losses that have been attributed to the partners.

In the case of Economic Interest Groups, when the accounting criteria so establish, the acquisition value will be reduced by the amount of financial expenses, negative tax bases, the capitalisation reserve, and deductions and bonuses, which have been attributed to the partners in the period of time between their acquisition and transfer, until the aforementioned value is cancelled, the corresponding financial income also being integrated into the tax base.