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Practical Handbook for Companies 2021

With legal status

All kinds of entities, whatever their form or name, are included, except for civil societies that do not have a commercial purpose.

Civil companies with legal personality and commercial purpose

For tax periods starting on or after 1 January 2016, civil companies with legal personality and commercial purpose are no longer taxed under the income attribution system and become corporate taxpayers.

In this regard, the Directorate General for Taxation has established in numerous consultations the requirements necessary for civil companies to be considered corporate taxpayers.Specifically, it considers that it is necessary to determine, firstly, in which cases a civil law partnership is deemed to acquire legal personality for corporate tax purposes and, secondly, to establish what is to be understood by a business purpose.

With regard to the first question, according to Article 1669 of the Civil Code, the civil law partnership has legal personality provided that the agreements between its partners are not secret.A civil law partnership therefore requires a willingness on the part of its members to act as an entity vis-à-vis third parties.No specific solemnity is required for their formation, but the agreements must not be secret.Transferring the above to the tax sphere, it can be concluded that in order to be considered a corporate taxpayer, it is necessary for the civil society to have declared itself as such before the tax authorities.For this reason, for the purposes of their consideration as corporate taxpayers, civil companies must be constituted in a public deed or in a private document, provided that in the latter case, said document has been submitted to the tax authorities for the purposes of assigning the tax identification number of legal persons and entities without legal personality, in accordance with Article 24.2 of Royal Decree 1065/2007, of 27 July, which approves the General Regulations on tax management and inspection actions and procedures and the development of the common rules for tax application procedures.Only in such cases will the entity be considered to have legal personality for tax purposes.

In addition, in order to be considered a corporate taxpayer, the civil law company must have a commercial purpose . For these purposes, a commercial object shall mean the performance of an economic activity of production, exchange or provision of services for the market in a sector not excluded from the commercial sphere.Therefore, entities engaged in agricultural, livestock, forestry, mining, fishing and professional activities, to which Law 2/2007 on professional companies is applicable, will be excluded from being taxpayers of corporation tax, as these activities are outside the commercial sphere.

The entities with legal personality include, among others:

  • Public limited companies, limited liability companies, general partnerships, labour companies, etc.

  • State, regional, provincial and local companies.

  • Cooperatives and agricultural processing companies.

  • Sole proprietorships.

  • Economic interest groupings.

  • European economic interest grouping.

  • Associations, foundations and institutions of all kinds, both public and private.

  • Government entities (State Administrations, Autonomous Community Administrations, Local Corporations, Autonomous Community Institutions, etc.).