Practical examples

Example 1

Company "A", whose net turnover in the 12 months prior to the start of the tax period exceeded 20 million euros, has a taxable base of 2,000,000 euros and is taxed at the general tax rate of 25 percent. In fiscal year 2023, this company has generated the right to apply the following deductions:

• Deduction to avoid international double taxation: 150,000 euros
• R&D&I deduction (art. 35 LIS ): 80,000 euros

• Liquidation of Corporate Tax for the year 2023:

First, the company will calculate the limit applicable to the deductions of Chapter IV of Title VI of the LIS regulated in article 39.1 of the LIS, that is, 25 percent of the positive adjusted total rate (total rate less deductions for double taxation and bonuses). If the amount of the deductions of articles 35 and 36 of the LIS generated in the tax period is greater than 10 percent of the positive adjusted total quota, the 25 percent limit is raised to 50 percent of the positive adjusted total quota.

Checking the limit in this case:

R&D&I deduction (art. 35 LIS): 80,000 euros

10% (500,000 – 150,000) = 35,000 euros

80,000 euros > 35,000 euros, so the company will apply the joint limit of 50 percent:

Limit art. 39.1 LIS: 50% (500,000 – 150,000) = 175,000 euros

Therefore, the company can apply the full amount of the R&D&I deduction (80,000 euros) in fiscal year 2023.

If minimum taxation is not applicable, the company would complete the Corporate Tax settlement for the 2023 financial year as follows:

However, in this case, since minimum taxation is applicable, the company must calculate the amount of the minimum net quota, in accordance with the provisions of article 30 bis of the LIS. 

First, the company will calculate the minimum net share in accordance with the provisions of section 1 of article 30 bis of the LIS and secondly, it will calculate the share in accordance with the rules contained in section 2 of said article. The lower amount obtained will be considered the minimum net quota.

Therefore, in this specific case, the lower amount is the one calculated according to the provisions of article 30 bis.1 of the LIS (300,000 euros) so this amount will be considered the minimum net quota. Since the rate calculated in accordance with the provisions of article 30 bis.2 of the LIS (350,000 euros) is higher than that of article 30 bis.1 of the LIS, the company may continue to apply deductions up to the limit of 300,000 euros (except in the case of deductions the amount of which is determined in accordance with Law 20/1991, of June 7, amending the tax aspects of the Economic and Fiscal Regime of the Canary Islands, and Law 19/1994, of July 6, amending the Economic and Fiscal Regime of the Canary Islands, which have a special regime), in accordance with the provisions of letter b) of article 30 bis.2 of the LIS.

According to the provisions of letter b) article 30 bis.2 of the LIS, in this specific case there are 50,000 euros left to reach the amount of 15 percent of the tax base (minimum net quota), once the full quota has been reduced by the following amounts:

• Bonuses 
• Deduction for investments made by port authorities (art. 38 bis LIS) 
• Deduction for double taxation 

Therefore, a deduction of 50,000 euros for R&D&I may be applied in application of article 30 bis of the LIS, since once all the concepts contained in said article have been reduced, the resulting amount is 350,000 euros, so there is a difference of 50,000 euros that allows 50,000 euros of the aforementioned deduction to be applied until reaching the amount of 300,000 euros of minimum net quota.

In this case, the minimum net quota (300,000 euros) is higher than the net quota (270,000 euros) that would correspond without minimum taxation, so the amount to be taxed as a net quota will be 300,000 euros, not allowing the full application of the R&D&I deduction (80,000 euros), but 50,000 euros. Therefore, there are 30,000 euros of the R&D&I deduction generated in 2023 pending to be applied in future tax periods.

Taking into account all of the above, the Web Companies program would recalculate the net share, so the settlement that the company must finally present once the provisions of article 30 bis of the LIS have been taken into account will be:

Example 2

Company "B", whose net turnover in the 12 months prior to the start of the tax period exceeded 20 million euros, has a taxable base of 1,000,000 euros and is taxed at the general tax rate of 25 percent. In fiscal year 2023, this company has generated the right to apply the following tax incentives:

• Bonus for income obtained in Ceuta and Melilla: 20,000 euros
• Deduction to avoid international double taxation: 10,000 euros
• Deduction for investments made by port authorities (art. 38 bis LIS) that does not give rise to non-deductible expenses: 90,000 euros
• R&D&I deduction (art. 35 LIS): 100,000 euros

The following deductions are pending application:

• R&D&I deduction (art. 35 LIS) pending for fiscal year 2022: 187,500 euros (the requirements for requesting advance payment under art. 39.2 LIS are met)
• Deduction for job creation (art. 37 LIS) pending from previous years: 150,000 euros

In addition, the company will be able to deduct withholdings amounting to 20,000 euros and partial payments of 10,000 euros.

• Liquidation of Corporate Tax for the year 2023

First, the company will calculate the limit applicable to the deductions of Chapter IV of Title VI of the LIS established in article 39.1 of the LIS. If the amount of the deductions of articles 35 and 36 of the LIS generated in the tax period is greater than 10 percent of the positive adjusted total quota (total quota less deductions for double taxation and bonuses), the 25 percent limit is raised to 50 percent of the positive adjusted total quota.

Checking the limit in this case:

R&D&I deduction (art. 35 LIS): 100,000 euros

10% (250,000 – 20,000 - 10,000) = 22,000 euros

100,000 euros > 22,000 euros, so the joint limit of 50 percent will apply:

Limit art. 39.1 LIS: 50% (250,000 – 20,000 - 10,000) = 110,000 euros

According to the above, the amount of the R&D&I deduction (100,000 euros) exceeds 10 percent of the full quota (22,000 euros), so the limit of the deduction will be 50 percent of the full quota (110,000 euros). Therefore, only 110,000 euros may be applied in this settlement for all the deductions in Chapter IV of Title VI of the LIS.

Society will have to decide how to apply the €110,000 limit. We understand that the most beneficial option for her would be to first apply the deduction for job creation (art. 37 LIS) because it comes from previous years and the company has 15 years to apply it instead of the 18 years in which the R&D&I deduction can be applied (art. 35 LIS). Furthermore, due to the deduction for job creation (art. 37 LIS) you do not have the possibility of requesting advance payment. Therefore, in fiscal year 2023 the company can apply 110,000 euros corresponding to the deduction for job creation (art. 37 LIS), leaving 40,000 euros pending for future periods. In addition, the amount of 100,000 euros corresponding to the R&D&I deduction (art. 35 LIS) generated in 2023 will remain pending application for future periods.

The deduction for investments made by port authorities (art. 38 bis LIS) falls outside the limit established in article 39.1 of the LIS, so, given that there is sufficient total tax, the company may apply the 90,000 euro deduction.

For the deduction of R&D&I pending for 2022, by meeting the requirements of art. 39.2 LIS, the company can exclude it from the limit of article 39.1 of the LIS and apply it with a discount of 20 percent of its amount. Since there is an insufficient quota, the company may request payment of the corresponding portion. Therefore, 80 percent of 187,500 euros will be deducted, that is, 150,000 euros (20,000 reducing the quota and 130,000 as an advance payment).

If minimum taxation is not applicable, the company would complete the Corporate Tax settlement for the 2023 financial year as follows:

However, in this case, since minimum taxation is applicable, the company must calculate the amount of the minimum net quota, in accordance with the provisions of article 30 bis of the LIS.

Firstly, the company will calculate the minimum net contribution in accordance with the provisions of article 30 bis.1 of the LIS (150,000 euros) and secondly, it will calculate the contribution in accordance with the rules set out in article 30 bis.2 of the LIS (130,000 euros). The lower amount obtained will be considered the minimum net quota.

Therefore, in this specific case, the lower amount is the one calculated as provided for in letter a) of article 30 bis.2 of the LIS (130,000 euros), so this amount will be considered the minimum net quota.  From the minimum net quota, the company may not continue applying deductions (except in the case of deductions whose amount is determined in accordance with Law 20/1991, of June 7, amending the tax aspects of the Economic Fiscal Regime of the Canary Islands, and Law 19/1994, of July 6, amending the Economic and Fiscal Regime of the Canary Islands, which have a special regime), in accordance with the provisions of letter b) of article 30 bis.2 of the LIS.

According to article 30 bis of the LIS, in this specific case, given the amount of the resulting minimum net quota, the rest of the deductions cannot be applied to the full quota, once the full quota has been reduced by the following amounts:

• Bonuses 
• Deduction for investments made by port authorities (art. 38 bis LIS) 
• Deduction for double taxation 

Therefore, the company will not be able to apply the deduction for job creation (article 37 LIS) in application of the provisions of article 30 bis of the LIS, since once all the concepts contained in said article have been reduced, the amount resulting from 130,000 euros is less than the 150,000 euros resulting from multiplying the amount by 15 percent of the tax base (minimum net tax rate). In this case, the minimum net quota will be 130,000 euros, so the amount to be taxed as a net quota will be 130,000 euros, not allowing the application of the 150,000 euros corresponding to the deduction of article 37 of the LIS, nor of the 100,000 euros of the R&D&I deduction (article 35 LIS) generated in this fiscal year 2023, leaving 250,000 euros pending application for future periods.

As regards the R&D&I deduction generated in 2022, the option of excluding it from the limit of article 39.1 of the LIS and applying it with a 20 percent discount of its amount is not affected by the amount of the minimum net quota, so that if there is sufficient quota, the company may apply 130,000 euros of the 150,000 euros outstanding (80% of 187,500 euros) and request payment of the remaining 20,000 euros.

Taking into account all of the above, the Web Companies program would recalculate the net share, so the settlement that the company must finally present once the provisions of article 30 bis of the LIS have been taken into account will be:

Example 3

Company "C", whose net turnover in the 12 months prior to the start of the tax period exceeded 20 million euros, has a taxable base of 2,000,000 euros and is taxed at the general tax rate of 25 percent. In fiscal year 2023, this company has generated the right to apply the following tax incentives:

• Deduction to avoid international double taxation: 45,000 euros
• R&D&I deduction (art. 35 LIS): 30,000 euros

• Liquidation of Corporate Tax for the year 2023

First, the company will calculate the limit applicable to the deductions of Chapter IV of Title VI of the LIS established in article 39.1 of the LIS. If the amount of the deductions under Articles 35 and 36 of the LIS is greater than 10 percent of the positive adjusted total quota, the 25 percent limit is raised to 50 percent of the positive adjusted total quota.

Checking the limit in this case:

R&D&I deduction (art. 35 LIS): 30,000 euros

10% (500,000 - 45,000) = 45,500 euros

30,000 euros < 45,500 euros, so the joint limit of 25 percent will apply:

Limit art. 39.1 LIS: 25% (500,000 - 45,000) = 113,750 euros

Therefore, the company can apply the full amount of the R&D&I deduction (30,000 euros) in fiscal year 2023.

If minimum taxation is not applicable, the company would complete the Corporate Tax settlement for the 2023 financial year as follows:

However, in this case, since minimum taxation is applicable, the company must calculate the amount of the minimum net tax in accordance with the provisions of article 30 bis of the LIS.

Firstly, the company will calculate the minimum net share in accordance with the provisions of article 30 bis.1 of the LIS (300,000 euros) and secondly, it will calculate the share in accordance with the rules set out in letter a) of article 30 bis.2 of the LIS (455,000 euros). The lower amount obtained will be considered the minimum net quota.

Therefore, in this specific case, the lower amount is the one calculated in accordance with article 30 bis.1 of the LIS (300,000 euros), so this amount will be considered the minimum net quota. The company, in accordance with the provisions of letter b) of article 30 bis.2 of the LIS, may continue to apply deductions up to a limit of 155,000 euros (except in the case of deductions the amount of which is determined in accordance with Law 20/1991, of June 7, amending the tax aspects of the Economic and Fiscal Regime of the Canary Islands, and Law 19/1994, of July 6, amending the Economic and Tax Regime of the Canary Islands, which have a special regime), which is the difference between the amount resulting from applying letter a) of article 30 bis.2 of the LIS (455,000 euros) and the amount resulting from applying article 30 bis.1 of the LIS (300,000 euros).

According to article 30 bis of the LIS, in this specific case there are 155,000 euros left to reach the amount of 15 percent on the taxable base, once the full rate has been reduced by the following amounts:

• Bonuses 
• Deduction for investments made by port authorities (art. 38 bis LIS) 
• Deduction for double taxation 

In this specific case, the minimum net quota is 300,000 euros because in accordance with the provisions of section 2 of article 30 bis LIS, it is not a lower amount than that calculated in accordance with section 1 of said article. Therefore, in accordance with the provisions of section 1 of article 30a of the LIS, the minimum net quota will be 300,000 euros.

The net rate may not be less than the amount resulting from applying article 30 bis of the LIS.

When comparing the net amount (425,000 euros) with the minimum net amount (300,000), we notice that the net amount is not less than the minimum net amount, so in this case, the amount that will be taken into account to continue the liquidation of the Corporate Tax will be €425,000.

Therefore, the 30,000 euros corresponding to the R&D&I deduction (art. 35 LIS) can be applied, leaving nothing pending for future periods.

Taking into account all of the above, Sociedades web will not recalculate the net quota, so the settlement that the company must finally present once article 30 bis of the LIS has been taken into account will be the following (in this case, the amount in the box for the minimum net quota will be different from that of the net quota):