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Practical Manual for Companies 2020.

Practical examples

Example 1:

Company "M" is a small entity that pays taxes under the special regime applicable to such entities provided for in articles 101 to 105 of the LIS , whose tax period coincides with the calendar year.

In 2019, the company was required to set aside a reserve of 100,000 euros, but only set aside the amount of 50,000 euros in that year.

In the Corporate Tax return for the year 2019 , company "M" should have completed the "Reserve allocation" section of the "Leveling reserve" table on page 20 bis of form 200 as follows:

Exercise
generation
Reservation amount
to be allocated
Reservation amount
allocated
Reservation amount
pending allocation
Reservation ready
2019 [02241] 100,000 [02242] 50,000 [02243] 50,000 [02244] 0

Later in the 2020 financial year, company "M" provided an additional reserve of 25,000 euros corresponding to the amount of the reserve that it was required to provide in the 2019 financial year.

In the Corporate Tax return for the year 2020 , company "M" must complete the "Reserve allocation" section of the "Leveling reserve" table on page 20 bis of form 200 as follows:

Exercise
generation
Reservation amount
to be allocated
Reservation amount
allocated
Reservation amount
pending allocation
Reservation ready
2020 [02413] 100,000 [002414] 75,000 [02415] 25,000 [02416] 0

As can be seen in this example, the amount of 100,000 euros to be entered in the column "Reserve amount to be allocated" does not vary in the different corporate tax returns as long as the obligation to allocate the equalisation reserve persists.

Example 2:

Company "A" is a small entity that pays taxes under the special regime applicable to such entities provided for in articles 101 to 105 of the LIS, whose tax period coincides with the calendar year.

Exercise 2019:

Equity of company "A" as of 01/01/2019Equity of company "A" as of 31/12/2019
Social capital
300,000
Social capital
300,000
Legal reserve
30,000
Legal reserve
30,000
Statutory reservations
10,000
Statutory reservations
10,000
Voluntary reserves
300
Voluntary reserves
30,300
Result of the 2018 financial year
50,000
---
---

Other data:

  • 2019 result of the profit and loss account of IS : 25,000
  • There is no difference between accounting results and tax results
  • Withholdings: 5,000
  • Tax rate: 25%

Calculation of capitalization and equalization reserves for the 2019 financial year

  1. First, company "A" calculates the capitalization reserve in accordance with article 25 of the LIS:

    Total: 300.300 Total: 330.300
    FP for the purposes of article 25 as of 01/01/2019FP for the purposes of article 25 as of 31/12/2019
    Social capital
    300,000
    Social capital
    300,000
    Voluntary reserves
    300
    Voluntary reserves
    30,300

    According to the above data, the increase in equity (Δ FP) is 30,000

    Therefore, the capitalisation reserve for the year, as established in article 25 of the LIS, will be 10% of the increase in the company's equity, with a limit of 10% of the positive tax base of the tax period prior to this reduction, the integration referred to in section 12 of article 11 of this Law and the compensation of negative tax bases.

    • Capitalization reserve = 10% reduction of Δ FP = 3,000
    • Limit 10% BI prior to capitalization reserve = 10% 250,000 = 25,000
    • Pending capitalization reserve to be applied = 0

    The requirements for maintaining the increase in equity must be met. A capitalisation reserve of 3,000 must also be provided.

  2. As for the levelling reserve for the 2019 financial year, as established in article 105 of the LIS, it may be reduced by up to 10% of the positive tax base, with a limit of 1 million euros:

    • Leveling reserve = 10% of positive BI = 10% 247,000 = 24,700
    • Limit = 1,000,000

    The amount of 24,700 will be added to the tax base of the tax periods ending in the 5 years immediately following the end of the 2019 tax period, provided that company A has a negative tax base, and up to the amount thereof. The remaining amount will be added to the tax base of the tax period corresponding to the date of completion of the aforementioned period.

    A leveling reserve of 24,700 must be provided in 2019.

    The settlement of the Corporate Tax for the year 2019 is as follows:

    IS settlement 2019
    Accounting result before taxes 2019 250,000
    Differences
    0
    BI prior to the reduction of art. 25 and the compensation of negative BI 250,000
    Capitalization reserve (limit 10% x 250,000 = 25,000)
    -3.000
    Compensation of negative tax bases from previous periods 0
    Taxable base 247,000
    Leveling Pool (Limit 1,000,000)
    -24.700
    BI after leveling reservation 222.300
    Tax rate 25%
    Total tax liability 55.575
    Tax deductions and bonuses 0
    Net share 55.575
    Withholdings and prepayments -5.000
    Due tax 50.575

Exercise 2020:

Equity of company "A" as of 01/01/2020Equity of company "A" as of 31/12/2020
Social capital
300,000
Social capital
300,000
Legal reserve
30,000
Legal reserve
30,000
Statutory reservations
10,000
Statutory reservations
20,000
Voluntary reserves
30,300
Capitalisation reserve
3,000
Result of the 2019 financial year
250,000
Levelling reserve
24,700
---
---
Voluntary reserves
60,300

Other data:

  • IS profit and loss account result for 2020: -20,000
  • There is no difference between accounting results and tax results
  • Withholdings: 5,000
  • Tax rate: 25%

Calculation of capitalization and equalization reserves for the 2020 financial year

  1. First, company "A" calculates the capitalization reserve in accordance with article 25 of the LIS:

    Total: 330.300 Total: 363,300
    FP for the purposes of article 25 as of 01/01/2020FP for the purposes of article 25 as of 31/12/2020
    Social capital
    300,000
    Social capital
    300,000
    Voluntary reserves
    30,300
    Voluntary reserves
    60,300
    ---
    ---
    Capitalization reserve
    3,000

    According to the above data, the increase in equity (Δ FP) is 33,000.

    Therefore, the capitalisation reserve for the year, as established in article 25 of the LIS, will be 10% of the increase in the company's equity, with a limit of 10 percent of the positive tax base of the tax period prior to this reduction, the integration referred to in section 12 of article 11 of this Law and the compensation of negative tax bases.

    • Capitalization reserve = 10% reduction of Δ FP = 3,300
    • Limit 10% BI prior to capitalization reserve = 0
    • Capitalization reserve pending application during the next two years = 3,300
  2. Regarding the leveling reserve for the 2020 financial year, given that the taxable base for the period is -20,000, the amounts reduced by the leveling reserve for 2019 must be added up to said amount.

    • 2019 Leveling Reserve Addition = 20,000
    • Leveling reserve pending addition = 24,700 - 20,000 = 4,700

    The settlement of the Corporate Tax for the year 2020 is as follows

    IS 2020 settlement
    Accounting result before taxes 2020 -20,000
    Differences
    0
    BI prior to the reduction of art. 25 and the compensation of negative BI -20,000
    Capitalization reserve (limit 0)
    0
    Compensation of negative tax bases from previous periods 0
    Taxable base -20,000
    Leveling reserve (negative BI limit: -20,000)
    20,000
    BI after leveling reservation 0
    Tax rate 25%
    Total tax liability 0
    Tax deductions and bonuses 0
    Net share 0
    Withholdings and prepayments -5.000
    Due tax -5.000

Completion of the capitalization and equalization reserve tables in model 200 for the years 2019 and 2020

• 2019 Corporate Tax Return
Levelling reserve (page 20 bis of model 200)
Reduction in tax base
Exercise
generation
BI minority amount
in the period / pending
added to the beginning of the period
Amount added to base
taxable in the period
Pending amount of
to be added in future periods
2019 [01034] 24,700 [01730] 0 [01731] 24,700
Reserve allocation
Exercise
generation
Reservation amount
to be allocated
Reservation amount
allocated
Reservation amount
pending allocation
Reservation ready
2019 [02241] 24,700 [02242] 24,700 [02243] 0 [02244] 0
Capitalization reserve (page 20 bis of form 200)
Exercise
generation
Right to reduce BI generated
in the period / pending
apply at the beginning of the period
BI reduction appliedPending BI reduction of
to be applied in future periods
2019 [01985] 3,000 [01986] 3,000 [01987] 0
Capitalization reserve provided in the year [01140] 0
• 2020 Corporate Tax Return
Levelling reserve (page 20 bis of model 200)
Reduction in tax base
Exercise
generation
BI minority amount
in the period / pending
added to the beginning of the period
Amount added to base
taxable in the period
Pending amount of
to be added in future periods
2020 [01034] 24,700 [01730] 20,000 [01731] 4.700
Reserve allocation
Exercise
generation
Reservation amount
to be allocated
Reservation amount
allocated
Reservation amount
pending allocation
Reservation ready
2020 [02413] 0 [02414] 0 [02415] 0 [02416] 20,000
Capitalization reserve (page 20 bis of form 200)
Exercise
generation
Right to reduce BI generated
in the period / pending
apply at the beginning of the period
BI reduction appliedPending BI reduction of
to be applied in future periods
2020 [02407] 3.300 [02408] 0 [02409] 3.300
Capitalization reserve provided in the year [01140] 3,000