Spanish economic interest groupings and temporary Joint Ventures

Regulation: Articles 43 and 45 LIS

Spanish economic interest groups and temporary company unions that apply this special tax regime will be taxed in accordance with the general rules of Corporate Tax with the specialties established in article 43 of the LIS, although temporary company unions will not apply. the valuation rule established in the second paragraph of article 43.4 of said Law.

When these entities pay taxes under this special regime, they must distinguish between the status of residents and non-residents in Spanish territory of their partners on the last day of the tax period subject to declaration, with the following tax effects:

1. Partners resident in Spanish territory or not resident in said territory, but with permanent establishment there. 

   • Spanish economic interest groups and joint ventures are subject to tax obligations derived from the application of Law on Corporate Tax, with the exception of the payment of the tax debt for the part of the tax base attributable to its partners.

   • These entities will not make installment payments on the part of the tax base attributable to their partners. In the event that these entities apply the modality of installment payments regulated in article 40.3 of the LIS, that part of the tax base attributable to their partners will not be part of the calculation basis for said installment payments.

   • In no case will the of article 41 of the LIS relating to the deduction of withholdings be ##1## with respect to that part of the tax base attributable to its partners , deposits on account and installment payments. 

   • Economic interest groups and temporary joint ventures of companies must allocate to their partners the following concepts:

     • The net financial expenses that these entities have not deducted in the tax period, in accordance with the provisions of article 16 of the LIS. The net financial expenses that are attributed to its 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 these entities 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 the Personal Income Tax.

     • The positive tax bases, reduced or increased , where appropriate, in the equalization reserve referred to in article 105 of the LIS, or negative, obtained by these entities. Therefore, these entities will not be able to offset the positive income they obtain with the negative tax bases that they attribute to their partners.

     • The bases of the deductions and bonuses in the quota to which the entity is entitled. The bases of the deductions and bonuses will be integrated into the partners' settlement, reducing the fee as appropriate by application of the Corporate Tax or Personal Income Tax rules.

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

   • The equalization reserve of tax bases of article 105 of the LIS will be added, where appropriate, to the tax base of the economic interest group or the temporary union of companies. 

2. Partners who are not resident in Spanish territory and do not operate through a permanent establishment there.

   • Economic interest groups and temporary joint ventures will pay Corporate Tax for the part of the tax base attributable to their non-resident partners.

   • In addition, these entities must make the corresponding installment payment with respect to that part of the tax base attributable to their non-resident partners .