Spanish economic interest groupings and temporary Joint Ventures

Regulation: Articles 43 and 45 LIS

Spanish economic interest groups and joint ventures that apply this special tax regime will be taxed according to the general rules of the Corporate Income Tax, with the specific provisions established in Article 43 of the LIS (Spanish Law on Corporate Income Tax), although joint ventures 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 groupings and temporary business associations are subject to the tax obligations arising from the application of the Corporate Income Tax Law, with the exception of the payment of the tax debt for the part of the taxable base attributable to their partners resident in Spanish territory or non-residents with a permanent establishment. Therefore, these entities must file the Corporate Tax return, but they are not obliged to pay the tax debt.

   • These entities They will not make installment payments. on the part of the taxable base attributable to its partners resident in Spanish territory or non-residents with a permanent establishment. 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.

   • Under no circumstances will it be appropriate with respect to that part of the taxable base attributable to its partners resident in Spanish territory or non-residents with a permanent establishment, refund of article 41 of the LIS Regarding the deduction of withholdings, payments on account and installment payments.

   • Economic interest groupings and temporary joint ventures They must charge their partners residing in Spanish territory or non-residents with a permanent establishment. the following concepts:

     • 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 .