Spanish economic interest groupings and temporary Joint Ventures

Regulation: Articles 43 and 45 LIS

Spanish economic interest groups and temporary business associations that apply this special tax regime will be taxed in accordance with the general rules of the Corporate Tax with the specialities established in article 43 of the LIS, although temporary business associations will not apply the valuation rule established in the second paragraph of article 43.4 of said Law.

When these entities are taxed under this special regime, they must distinguish between the status of residents and non-residents in Spanish territory of their partners on the last day of the tax period subject to declaration, with the following tax effects:

1. Partners residing in Spanish territory or not residing in said territory, but with a permanent establishment therein.

   • Spanish economic interest groups and temporary joint ventures are subject to the tax obligations arising from the application of the Corporate Tax Law, with the exception of the payment of the tax debt for the part of the taxable base attributable to their partners. Therefore, these entities must file the Corporate Tax return, but they are not obliged to pay the tax debt.

   • These entities will not make fractional payments on the part of the tax base attributable to their partners. In the event that these entities apply the modality of fractional payments regulated in article 40.3 of the LIS, that part of the taxable base attributable to their partners will not be included in the calculation base of said fractional payments.

   • In no case will proceed with respect to that part of the tax base attributable to its partners the refund of article 41 of the LIS relative to the deduction of withholdings, payments on account and fractional payments.

   • Economic interest groups and temporary business associations must attribute the following concepts to their partners :

     • The net financial expenses that these entities have not deducted in the tax period, in accordance with the provisions of article 16 of the LIS. Net financial expenses charged to its partners will not be deductible by the entity.

     • The capitalization reserve that, in accordance with the provisions of article 25 of the LIS, has not been applied by these entities in the tax period. The capitalization reserve attributed to its partners may not be applied by the entity, unless the partner is a taxpayer of Personal Income Tax.

     • The positive tax bases, reduced or increased, where appropriate, in the equalization reserve referred to in article 105 of the LIS, or negative, obtained by these entities. Therefore, these entities will not be able to offset the positive income they obtain with the negative tax bases they attribute to their partners.

     • The bases for the deductions and bonuses in the quota to which the entity is entitled. The bases of the deductions and bonuses will be integrated into the liquidation of the partners, reducing the quota as appropriate by application of the regulations of the Corporate Tax or the Personal Income Tax.

     • The withholdings and payments on account corresponding to the entity.

   • The leveling reserve of taxable bases of article 105 of the LIS will be added, where appropriate, to the taxable base of the economic interest grouping or the temporary joint venture.

2. Partners who are not resident in Spanish territory and who do not operate through a permanent establishment therein.

   • Economic interest groups and temporary business associations will be subject to corporate tax on the part of the taxable base attributable to their non-resident partners.

   • In addition, these entities must make the corresponding fractional payment with respect to that part of the taxable base attributable to their non-resident partners .