Tax incentives for small enterprises

A company is considered to be small when in the immediately preceding tax period, its net turnover was less than 10 million euros.

When the immediately preceding tax period had a duration of less than one year, or the activity had been carried on for a shorter period, the net turnover shall be increased by one year.

The tax incentives established for small companies will also be applicable in the 3 periods immediately following the tax period in which the entity or group of entities referred to in section 3 of article 101 of the LIS reaches the aforementioned turnover of 10 million euros, determined in accordance with the provisions of that article, provided that they have fulfilled the conditions to be considered as small in size, both in that period and in the two tax periods prior to the latter.

The provisions of the preceding paragraph shall also apply when said turnover is reached as a result of having carried out an operation under the tax regime established in Chapter VII of Title VII of the LIS , provided that the entities that have carried out such operation meet the conditions to be considered as small in size both in the tax period in which the operation is carried out and in the two tax periods prior to the latter.

Positive components:

1. Sales and provision of services rendered in the ordinary course of business.

2. The delivery of goods and services made by the company in exchange for non-monetary assets or in return for services that represent expenses for the company.

3. The portion of subsidies granted on the basis of units of product sold and forming part of their sale price.

Negative components:

1. Sales returns.

2. Refunds on sales or provision of services.

3. Trade deductions made from the income taken into account in the annual turnover.

When the entity is part of a group of companies within the meaning of Article 42 of the Commercial Code, regardless of residence and the obligation to prepare consolidated financial statements, the net amount of turnover shall refer to all entities belonging to said group, taking into account the corresponding eliminations and additions due to the application of accounting regulations.

Consequently, when the entity is part of a group of companies within the meaning of article 42 of the Commercial Code, if the net amount of the turnover of all the entities belonging to the group exceeded 10 million euros in the previous year, none of the companies comprising the group may apply the tax incentives established in the LIS for small companies.

A group exists when one company, directly or indirectly, controls or can control another or others. Specifically, control is understood to exist when a company, deemed the parent, holds relations with another company, deemed the subsidiary, in any of the following situations:

1. It holds the majority of the voting rights.

2. It has the power to appoint or dismiss the majority of the members of the governing body.

3. It can avail of the majority of the voting rights by virtue of agreements held with third parties.

4. It has assigned its voting rights to the majority of the members of the governing body, who are in office at the time of the preparation of the consolidated accounts and during the two years immediately prior thereto. Specifically, this circumstance shall be understood to apply when the majority of the members of the governing body of the subsidiary are members of the governing body or senior management of the parent or other company held by the parent. This will not give rise to consolidation if the company whose directors have been appointed is associated to another in any of the cases set forth in the first two parts of this section.

For the purposes of this section, voting rights attributable through other subsidiaries or through parties acting in their own name but on behalf of the parent or other subsidiaries, or those agreed with any other party, shall be added to the voting rights of the parent company.