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Practical Handbook for Companies 2021

Levelling reserve converted into tax payable

Article 29.2 of the LIS regulates the tax rates applicable to cooperatives, establishing that tax-sheltered cooperatives will be taxed on cooperative results at 20 per cent and on extra-cooperative results at the general rate of 25 per cent;and credit cooperatives and rural banks for cooperative results at the general rate of 25 per cent and for non-cooperative results at 30 per cent.

According to the provisions of Article 29.2 of the LIS, a tax-sheltered cooperative is subject to corporation tax at a different rate from the general rate , and therefore cannot apply the equalisation reserve (not even for extra-cooperative results).

Consequently, only cooperative societies that do not have the status of fiscally protected can opt to apply the tax benefit of the equalisation reserve.

Filling in form 200

The boxes [01285] and [01286] "Equalisation reserve converted into quotas (only entities of art. 101 LIS)" on page 14 of form 200, will be completed only when the reporting entity is a cooperative society that does not have tax protected status, and chooses to apply the tax incentive of the equalisation reserve established in article 105 of the LIS, provided that they meet the conditions established in article 101 of the LIS and apply the tax rate established in the first paragraph of article 29.1 of this Law.

Cooperatives that do not have tax protected status and choose to apply the equalisation reserve, must have previously ticked the box [00019] "Rest of cooperatives" and the box [00006] "Incentives for small entities (Chap. XI, Tít.VII LIS)" on page 1 of Form 200.

In the tax periods in which these co-operative societies opt to apply the equalisation reserve, the following adjustments must be made in the boxes [01285] and [01286] "Equalisation reserve converted into quotas (only entities of art. 101 LIS)" on page 14 of form 200:

  • In the box [01286] of decreases, a negative adjustment to the previous positive gross tax liability shall be entered, taking into account the limits mentioned in Article 105 of the LIS.

  • Likewise, cooperative societies that have opted to apply this tax benefit will be obliged to reverse this adjustment in the box [01285] of increases in the tax periods that end in the five years immediately following the end of the said period, as it generates a previous negative gross tax liability and up to the amount of the same.