Application of limiting the deductibility of financial expenses

When the net financial expenses of a one-year tax period do not exceed 1 million euros , these will be tax deductible without being subject to the limit of the 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 deductible for tax purposes 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 the net financial expenses in the tax periods ending in the 5 immediate and successive years, until said difference is deducted.

The same does not occur with respect to the amount of 1 million euros, to the extent that if the net financial expenses of a year do not reach said amount, the difference between 1 million euros and the net financial expenses deducted in the tax period is not may apply 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 said amount.

Regarding the application of this limitation to 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 attributed 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 own funds of any type of entities will be deducted with the additional limit of 30 percent of the operating profit of the entity itself that made said acquisition, without including in said operating profit that 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 will not be applicable in the tax period in which the shares in the capital or own funds of entities are acquired if the acquisition is financed with debt, at a maximum of 70 percent of the acquisition price. Likewise, this limit will not apply in subsequent tax periods as long as the amount of that debt is reduced, from the moment of acquisition, at least in the proportional part that corresponds to each of the following 8 years, until the debt reaches 30 percent of the acquisition price.