How to file a return for previous years

Article 7 of Royal Decree-Law 23/2020, of June 23, as amended by the Eighth Final Provision of Royal Decree-Law 34/2020, of November 17, with effect for tax periods beginning within the years 2020 and 2021, establishes that the deduction percentage referred to in letter c) of article 35.2 of the LIS (Corporate Tax Law) will be increased by 38 percentage points for expenses incurred on projects initiated after June 25, 2020, consisting of the performance of technological innovation activities the result of which is a technological advance in obtaining new production processes in the value chain of the automotive industry or substantial improvements to existing ones. Thus, this deduction is increased depending on the type of taxpayer among those taxpayers who are considered small and medium-sized companies in accordance with the provisions of Annex I of Regulation (EU (European Union)) No. 651/2014 of the Commission, of June 17, 2014, and those that do not. For taxpayers who do not qualify, the expected increase will be 3 percentage points.

The fourth Final Provision of Royal Decree-Law 23/2020, of June 23, introduced the sixteenth Additional Provision in the LIS, which includes a new assumption of freedom of amortization in investments made in the electric, sustainable or connected mobility value chain. In this regard, the sixteenth Additional Provision of the LIS, as amended by Royal Decree-Law 34/2020, includes the tax incentive of freedom of amortization on investments made in the electric, sustainable or connected mobility value chain for investments made in tax periods ending between April 2, 2020 and June 30, 2021. In this way, investments in new elements of tangible fixed assets that involve the sensing and monitoring of the production chain, as well as the implementation of manufacturing systems based on modular platforms or that reduce the environmental impact, related to the automotive industrial sector, made available to the taxpayer and that come into operation between April 2, 2020 and June 30, 2021, may be freely amortized, provided that, during the 24 months following the start date of the tax period in which the acquired elements come into operation, the total average workforce of the entity remains with respect to the average workforce for the year 2019. It should be noted that the maximum investment amount that may benefit from the free amortization regime will be 500,000 euros.

In addition, to apply this assumption of freedom of amortization, taxpayers must provide a reasoned report issued by the Ministry of Industry, Trade and Tourism to qualify the taxpayer's investment as suitable. This report will be binding on the tax authorities.

This new assumption of freedom of amortization regulated in the Sixteenth Additional Provision of the LIS is incompatible with the assumption of freedom of amortization established in article 102 of the LIS for small entities, so these entities will have to choose to apply one of the two tax incentives.

With effects for tax periods that begin on January 1, 2020 and that have not ended on March 11, 2021, Royal Decree-Law 4/2021, of March 9, which modifies the Law 27/2014, of November 27, on Corporate Tax, and the consolidated text of the Non-Resident Income Tax Law, approved by Royal Legislative Decree 5/2004, of March 5, in relation to hybrid asymmetries , introduces a new article 15 bis in the LIS , with the consequent repeal of article 15 j) of the IS , and adds sections 6 and 7 to article 18 of the Consolidated Text of the Non-Resident Income Tax Law, with the aim of transposing Council Directive (EU) 2016/1164, of July 12, 2016, in the wording given by the Directive ( EU) 2017/952 of the Council, of May 29, 2017, regarding hybrid asymmetries that take place between Spain and other Member States and between Spain and third countries or territories.

In general, the introduction of this new article 15 bis of the LIS aims to neutralise the tax effects generated by hybrid asymmetries between a taxpayer of Corporate Tax located in Spanish territory and a related entity established in another Member State or in a third country or territory, when they carry out operations that have different tax classifications in Spain and in that other country.

Article 65.1 of Law 11/2020, of December 30, on the General State Budget for the year 2021, with effect for tax periods beginning on or after January 1, 2021, that have not ended upon the entry into force of this law (01-01-2021) and indefinite validity, modifies the regulation in article 16.1 of the LIS on the limitation on the deductibility of financial expenses, establishing that for the determination of operating profit, the addition of financial income from participations in equity instruments that correspond to dividends will not be taken into account, when the acquisition value of said participations is greater than 20 million euros, without reaching the percentage of 5 percent referred to in articles 21.1 a) and 32.1 a) of the LIS.

On the other hand, due to the incorporation into the LIS of article 15 bis (with the consequent repeal of article 15 j) of the LIS) carried out by Royal Decree-Law 4/2021, of March 9, with the aim of transposing Council Directive (EU) 2016/1164, of July 12, 2016, in the wording given by Council Directive (EU) 2017/952, of May 29, 2017, regarding hybrid asymmetries that have place between Spain and other Member States and between Spain and third countries or territories, article 16.1 of the LIS is modified in said Royal Decree-Law, to establish that the reference made to the expenses referred to in the repealed article 15 j) of the LIS, must be carried out with effect for the tax periods that begin on January 1, 2020 and that have not concluded upon the entry into force of this Royal Decree-Law (March 11, 2021), to the non-deductible expenses of article 15 bis of the LIS.

Law 11/2021, of July 9, on measures to prevent and combat tax fraud modifies the regulation of exit taxation, with the aim of transposing Council Directive (EU) 2016/1164, of July 12 of 2016, which states that the function of said taxation is to guarantee that, when a taxpayer moves his assets or his tax residence outside the tax jurisdiction of the State, said State must tax the economic value of any capital gain created in its territory, even when said capital gain has not yet been realized at the time of departure.

Specifically, with effect for tax periods beginning on or after 1 January 2021, through the amendment introduced to article 19.1 of the LIS by Law 11/2021, of 9 July, in cases of change of residence of an entity to a Member State of the European Union or the European Economic Area that has entered into an agreement with Spain or the European Union on mutual assistance in the collection of tax credits, the possibility that the taxpayer had to defer payment of the tax debt resulting from the application of the provisions of the first paragraph of the aforementioned article 19.1 of the LIS, until the affected assets were transferred to third parties, is replaced by the possibility of splitting said payment, also at the request of the taxpayer, into equal annual fifths.

The option may be exercised exclusively in the Corporate Tax return corresponding to the tax period concluded on the occasion of the change of residence, taking into account that the payment of the first instalment must be made within the voluntary declaration period corresponding to said tax period. The maturity and enforceability of the four remaining annual fractions will be demanded together with the late payment interest accrued for each of them, successively after one year has elapsed from the end of the voluntary declaration period corresponding to the last tax period. Furthermore, the provision of guarantees will be required when there is reasonable evidence that debt collection could be frustrated or seriously hampered.

Finally, the cases in which the fractionation will lose its validity are collected, as well as the consequences of said loss.

Article 65.Two of Law 11/2020, of December 30, on the General State Budget for the year 2021, with effect for tax periods beginning on or after January 1, 2021 that have not concluded upon the entry into force of this law (01-01-2021) and indefinite validity, modifies the first paragraph of letter a) of article 21.1 of the LIS and letter a) of article 21.6 of the LIS , to establish that dividends or shares in profits of entities will be exempt when the requirement is met that the percentage of participation, direct or indirect, in the capital or in the entity's own funds is at least 5 percent, eliminating the alternative requirement that the acquisition value of the participation be greater than 20 million euros.

In relation to the above, the fortieth transitional provision is added to the LIS to regulate a transitional regime to be applied for a period of 5 years to the shares acquired in the tax periods beginning before January 1, 2021, which had an acquisition value greater than 20 million euros, without reaching the 5 percent percentage established in article 21.1 a) of the LIS .

On the other hand, section 10 is added to article 21 of the LIS , which establishes that the amount of dividends or shares in profits of entities and the amount of positive income obtained from the transfer of a share in an entity and in the rest of the cases referred to in article 21.3 of said Law, to which the exemption provided for therein applies, shall be reduced, for the purposes of applying said exemption, by 5 percent as management expenses related to said shares, and section 11, which states that the 5 percent reduction applicable to dividends or shares in profits of entities referred to in the aforementioned section 10 shall not apply when the following circumstances occur:

• Dividends or profit shares are received by an entity whose net turnover in the immediately preceding tax period is less than 40 million euros.

• Dividends or profit shares come from an entity established after January 1, 2021, in which all of the capital or equity is held directly since its establishment.

• Dividends or profit shares are received in the tax periods that end in the 3 years immediately following the year of incorporation of the entity that distributes them.

Finally, a paragraph is added at the end of article 64 of the LIS which establishes that the amounts that must be included in the individual tax bases by application of the provisions of article 21.10 of the LIS will not be subject to elimination.

Article 65.3 of Law 11/2020, of December 30, on the General State Budget for the year 2021, with effect for tax periods beginning on or after January 1, 2021 that have not ended upon the entry into force of this law (01-01-2021) and indefinite validity, modifies letter a) of article 32.1 of the LIS, which regulates the deduction for international double taxation on dividends or profit shares paid by an entity not resident in Spanish territory, eliminating the alternative requirement that the acquisition value of the share be greater than 20 million euros.

In relation to the above, the fortieth transitional provision is added to the LIS to regulate a transitional regime to be applied for a period of 5 years to the shares acquired in the tax periods beginning before January 1, 2021, which had an acquisition value greater than 20 million euros, without reaching the 5 percent percentage established in article 32.1 a) of the LIS.

Finally, section 4 of article 32 of the LIS is amended to add that, in order to calculate the full quota, dividends or profit shares will be reduced by 5 percent as management costs related to said shares, unless the circumstances of non-application regulated in article 21.11 of the LIS occur. Any excess over this limit will not be considered a tax-deductible expense, without prejudice to the provisions of article 31.2 of the LIS.

In relation to the deduction for investments in Spanish film productions of feature films and short films and audiovisual series of fiction, animation or documentary, Law 11/2020, of December 30, on the General State Budget for the year 2021, with effect for tax periods beginning on or after January 1, 2021, modifies letter a') of article 36.1 of the LIS , adding that the required certificates will be binding on the tax authorities, regardless of the date on which they were issued.

Furthermore, Royal Decree-Law 17/2020, of May 5, modifies the definition of cinematographic productions and allows that until August 31, 2020 (this period is extended until January 31, 2021, as established in the first section of Order CUD/807/2020, of August 27) they are also considered a commercial release of a film, without it losing its status as a cinematographic film, making applicable the deduction for investments in Spanish cinematographic productions regulated in article 36.1 of the LIS, the one carried out through television and platforms that offer streaming content (through television audiovisual communication services, as well as electronic communication services that broadcast television channels or program catalog services).

On the other hand, the last paragraph of article 39.1 of the LIS is modified, adding that the increased limit of the deduction to 50 percent will also apply (in addition to the deduction for research and development activities and technological innovation regulated in article 35 of the LIS), to the deduction for investments in film productions, audiovisual series and live shows of performing and musical arts regulated in article 36 of the LIS, when these deductions exceed 10 percent of the total account reduced by the deductions to avoid international double taxation and the bonuses.

Section 5 of article 39 of the LIS is also amended to establish, in relation to the requirement of permanence of the assets affected by the deductions to encourage certain activities regulated in articles 35 to 38 of the LIS, that in the case of the deduction for investments in cinematographic productions, audiovisual series and live shows of performing and musical arts regulated in article 36 of the LIS, said requirement will be deemed to be met to the extent that the producer maintains the same percentage of ownership of the work for the period of 3 years, without prejudice to its power to market all or part of the exploitation rights derived from it to one or more third parties.

Finally, section 7 is added to article 39 of the LIS, which extends the application of the deductions regulated in sections 1 and 3 of article 36 of the LIS to the taxpayer who participates in the financing of Spanish productions of feature films and short films and audiovisual series of fiction, animation, documentaries or production and exhibition of live shows of performing arts and music carried out by another taxpayer. The taxpayer who participates in the financing of said productions must provide amounts as financing, to cover all or part of the production costs without acquiring intellectual property rights or other rights with respect to the results thereof, the ownership of which must in all cases belong to the producer. These contributions can be made at any stage of production until the nationality certificate is obtained.

In relation to the deduction for investments in foreign productions of feature films or audiovisual works, Law 11/2021, of July 9, on measures to prevent and combat tax fraud, with effect for tax periods beginning on or after January 1, 2021, incorporates in article 36.2 of the LIS, some of the requirements that must be met by producers in charge of the execution of foreign productions of feature films, in order to apply said deduction.

For these purposes, a certificate issued by the Institute of Cinematography and Audiovisual Arts, or by the corresponding body of the Autonomous Community, is required, certifying the cultural nature of the production in order to comply with the provisions of the Communication from the Commission on State aid to cinematographic works and other productions of the audiovisual sector, dated November 15, 2013. Furthermore, the inclusion of specific filming locations in Spain in the credits of the work is requested, as well as authorization for the use of the title of the work and of graphic and audiovisual press material that expressly includes specific filming locations or any other production process carried out in Spain, for the realization of activities and the preparation of promotional materials in Spain and abroad for cultural or tourist purposes, which may be carried out by state, regional or local entities with powers in matters of culture, tourism and economy.

Finally, the forty-second transitional provision of the LIS is added, which establishes that the requirements regulated in letters b') and c') of article 36.2 of the LIS referred to in the previous paragraph will not be required in the case of foreign productions of feature films and audiovisual works for which the contract by which the execution of the production is commissioned had been signed prior to the date of entry into force (11-07-2021) of the Law on measures to prevent and combat tax fraud.

Article 65.Five of Law 11/2020, of December 30, on the General State Budget for the year 2021, with effect for tax periods beginning on or after January 1, 2021, that have not concluded upon the entry into force of this law (01-01-2021) and indefinite validity, modifies section 10 of article 100 of the LIS, which establishes that dividends or profit shares will not be integrated into the tax base in the part that corresponds to the positive income that has been included in the tax base, incorporating that for these purposes, the amount of dividends or profit shares will be reduced by 5 percent as management expenses related to said shares, unless the circumstances established in article 21.11 of the LIS occur.

Section 11 of article 100 of the LIS is also amended, which establishes that in order to calculate the income derived from the transfer of the participation, direct or indirect, the acquisition value will be increased by the amount of the social benefits that, without effective distribution, correspond to income that would have been attributed to the partners as income from their shares or participations in the period of time between their acquisition and transfer, incorporating, for these purposes, that the amount of the social benefits referred to in this section will be reduced by 5 percent as management expenses related to said participations.

Subsequently, Law 11/2021, of July 9, on measures to prevent and combat tax fraud, with effects for tax periods starting on January 1, 2021, modifies article 100 of the LIS with the purpose of transposing Directive (EU) 2016/1164, of the Council, of July 12, 2016.

For these purposes, section 1 of article 100 of the LIS is amended to establish that the imputation of income that occurs through the application of the international tax transparency regime not only affects income obtained by entities in which the taxpayer has a stake, but also income obtained by its permanent establishments abroad. Section 12 of article 100 of the LIS is also amended to add the documentation that must be provided along with the corporate tax return for income obtained by said permanent establishments.

Finally, section 3 of article 100 of the LIS is amended to introduce various types of income that may be subject to imputation in this international tax transparency regime, such as those derived from financial leasing operations or from insurance, banking and other financial activities.

With effect for tax periods beginning on or after 1 January 2021, Law 11/2021 of 9 July on measures to prevent and combat tax fraud amends Article 119 of the LIS to introduce a technical improvement in the regulation of deregistration in the index of entities for Corporate Tax, to clarify that the concept of "bankrupt" must be applied to debtor entities and not to credits.

With effect for tax periods beginning on or after 1 January 2021, the Second Final Provision of Law 11/2021, of 9 July, on measures to prevent and combat tax fraud, modifies the special tax regime applicable to Listed Real Estate Investment Companies (SOCIMI), introducing in section 4 of article 9 of Law 11/2009, of 26 October, a special tax of 15 percent on the amount of profits obtained in the year that are not subject to distribution, in the part that comes from income that has not been taxed at the general corporate tax rate and is not income subject to the 3-year reinvestment period regulated in letter b) of article 6.1 of Law 11/2009.

This special tax will be considered a Corporate Tax rate and will be accrued on the day of the agreement to apply the results of the financial year by the general meeting of shareholders, or equivalent body. This special tax must be self-assessed and paid in form 237 approved by Order HFP/1430/2021, of December 20, within two months from the accrual date.

Finally, due to the introduction of this special tax, section 1 of article 11 of Law 11/2009, of October 26, which regulates the information obligations in the annual accounts report, is modified to add the obligation to distinguish in said information, the part of the income subject to the special tax rate of 15%.

1. Deduction for investment in cinematographic production

With effect for tax periods beginning on or after 1 January 2021, the First Final Provision of Law 14/2021, of 11 October, which modifies Royal Decree-Law 17/2020, of 5 May, approving support measures for the cultural sector and of a tax nature to address the economic and social impact of COVID-2019, modifies the Fourteenth Additional Provision of Law 19/1994, of 6 July, modifying the Economic and Fiscal Regime of the Canary Islands, to update the limits applicable to deductions for investments in film productions and audiovisual series made in the Canary Islands.

In this way, it is established that the amount of the deduction for investments in Spanish productions of feature films and short films and audiovisual series of fiction, animation or documentary regulated in article 36.1 of the LIS, may not be higher than the result of increasing by 80% the maximum amount referred to in said article when it concerns productions made in the Canary Islands.

Furthermore, it is established that the amount of the deduction for expenses incurred in Spanish territory for foreign productions of feature films or audiovisual works regulated in article 36.2 of the LIS, as well as the amount of the deduction for expenses incurred in the production and exhibition of live shows of performing and musical arts referred to in article 36.3 of the LIS, may not be higher than the result of increasing by 80% the maximum amount referred to in said articles when it concerns expenses incurred in the Canary Islands.

2. Tax regime for ships and shipping companies in the Canary Islands

With effect for tax periods beginning on or after 1 January 2021 that have not ended on 11 July 2021, Law 11/2021, of 9 July, on measures to prevent and combat tax fraud, adds section 3 to article 73 of Law 19/1994, of 6 July, amending the Economic and Tax Regime of the Canary Islands, to establish that vessels of shipping companies registered in the Special Register of Vessels and Shipping Companies that were registered in another Member State of the European Union or the European Economic Area, are also considered to be registered in the Special Register, provided that they comply with the requirements that are required of the rest of the vessels for their registration.

introducing a limitation on such applicable bonuses. For these purposes, it is established that when the part of the tax base that comes from the performance of activities closely related to maritime transport exceeds the part of the tax base resulting from the activities that generate the right to apply the special regime, the quota corresponding to said excess may not be subject to a bonus. This limitation shall apply to each of the vessels whose operation generates the right to the bonus.

Finally, Article 76 of Law 19/1994, of July 6, adds that the negative tax bases derived from the activities that generate the right to apply the special regime for ships and shipping companies in the Canary Islands, may not be offset with positive tax bases derived from the rest of the entity's activities, either in the current year or in subsequent years.

With effect for tax periods beginning on or after 1 January 2021, Law 14/2021, of 11 October, which amends Royal Decree-Law 17/2020, of 5 May, modifies article 2 of Law 49/2002, of 23 December, to include within the list of non-profit entities, and which may thus be considered as beneficiary entities of patronage, non-resident entities that operate in Spanish territory through a permanent establishment and entities resident in a Member State of the European Union or in other Member States of the European Economic Area.

On 31 January 2020, the United Kingdom effectively left the European Union.

However, it should be noted that, in relation to Corporate Tax, there is a bilateral Agreement between the United Kingdom and Spain to avoid double taxation, which will continue to apply from 1 January 2021. For these purposes, certain income that is no longer exempt under the application of internal regulations would continue to be considered exempt income invoking the right to apply said Convention.