Application of limiting the deductibility of financial expenses

When the financial expenses of a one- tax period do not exceed 1 million euros they will be tax deductible without being subject to the limit of 30 percent of the operating profit for the year And when the tax period has a duration of less than one year, the amount of net financial expenses of the same that are tax deductible without said limit will be the result of multiplying 1 million euros by the proportion of the duration of the tax period with respect to the year.

The net financial expenses not deducted may be deducted in the following tax periods, together with those of the corresponding tax period, and with the limit of 30 percent referred to. In the event that the net financial expenses of the tax period do not reach said limit, the difference between this and the net financial expenses of the tax period will be added to the limit, with respect to the deduction of net financial expenses in the tax periods that end in the 5 immediate and successive years, until said difference is deducted.

The same does not apply to the amount of 1 million euros, since if the net financial expenses for a financial year do not reach this amount, the difference between 1 million euros and the net financial expense deducted in the tax period cannot be applied in future tax periods. However, the amount of 1 million euros can be reached with the net financial expenses of the tax period and with financial expenses pending deduction from previous tax periods up to that amount.

As regards the application of this limitation to the entities that pay taxes in accordance with the provisions of article 43 of the LIS , article 16.3 of the LIS establishes that the net financial expenses imputed to the partners of said entities will be taken into account by them for the purposes of applying the 30 percent limit.

Finally, in relation to the application of the limitation on the deductibility of financial expenses, article 16.5 of the LIS establishes that financial expenses derived from debts intended for the acquisition of shares in the capital or equity of any type of entities will be deducted with the additional limit of 30 percent of the operating profit of the entity that made said acquisition, without including in said operating profit the profit corresponding to any entity that merges with it in the 4 years following said acquisition, when the merger does not apply the special tax regime provided for in Chapter VII of Title VII of the LIS. These financial expenses will also be taken into account in the limit referred to in section 1 of this article.

Non-deductible financial expenses resulting from the application of the provisions of this section will be deductible in subsequent tax periods with the limit provided for in sections 1 and 5 of article 16 of the LIS.

The limit provided for in this section shall not apply in the tax period in which the shares in the capital or equity of entities are acquired if the acquisition is financed with debt for a maximum of 70 percent of the acquisition price. Likewise, this limit will not apply in the following tax periods provided that the amount of that debt is reduced, from the moment of acquisition, by at least the proportional part corresponding to each of the following 8 years, until the debt reaches 30 percent of the acquisition price.