New regulations for 2019

Canary Islands Special Zone (ZEC) Branches in tax consolidation

ZEC Due to the novelty introduced by article One. Forty-three of Law 8/2018, of November 5, which modifies Law 19/1994, of July 6, modifying the Economic and Fiscal Regime of the Canary Islands, which we attach, we prepare this note in order to explain how taxpayers must file their corresponding Corporate Tax return:

With effect for tax periods beginning on or after January 1, 2018, a new Fourteenth Additional Provision bis is added with the following wording:

«Additional Provision fourteenth bis. Corporation Tax. Application of the tax consolidation regime to entities with branches in the Canary Islands Special Zone .

The application of the special tax rate established in article 43 of this Law in the case of branches of the Canary Islands Special Zone of entities with tax residence in Spain will not prevent said entities from forming part of a tax group that applies the tax consolidation regime provided for in Chapter VI of Title VII of Law 27/2014, of November 27, on Corporate Tax.

Notwithstanding the foregoing, the part of the tax base of the entity that forms part of a tax group and that is attributable to the branch of the Canary Islands Special Zone will not be included in the individual tax base of the entity for the purposes of determining the tax base of the tax group, and will be subject to a separate declaration in the terms determined by regulation.

Due to the lack of regulatory development, taxpayers who have branches in the Canary Islands Special Zone of entities with tax residence in Spain that are part of a tax group that applies the tax consolidation regime, must submit two models 200 , since the law provides that they must be declared separately:

1. Form 200 to declare the part of the Taxable Base to which the ZEC zone tax rate will be applied:

   Box 00015 “ZEC Entity” on page 1 of Form 200 must be checked, without indicating that it is part of a tax group, that is, without checking the characters 00009 “Dominant entity of a tax group” or 00010 “Dependent entity of a tax group” included on page 1.

   This declaration must be completed only with data relating to the Canary Islands Special Zone branch of entities with tax residence in Spain, both on the pages dedicated to the Balance Sheet, Profit and Loss Account and Statement of Changes in Net Assets, as well as the data relating to the liquidation.

   When character 00015 is marked on the form for completing model 200, Sociedades web 2018 will open a window so that you can indicate whether the entity also pays taxes by fiscal consolidation. In the event that the Corporate Tax is filed using an external development instead of Web Companies, a new field created for this purpose in the Registry Design called "ZEC Entity that belongs to a tax group" must be used.

2. Form 200 for the part of the Tax Base that is not taxed at the special rate and that will apply a special consolidation regime:

   The characters 00009 “Dominant entity of a tax group” or 00010 “Dependent entity of a tax group” must be marked, as applicable, included on page 1 of Form 200, without indicating that the special tax rate applies to the Canary Islands Special Zone Branch, that is, without marking box 00015 “ZEC Entity”.

   This declaration must be completed only with data relating to the entity that is part of a tax group and that are not attributable to the branch of the Canary Islands Special Zone, that is, the data relating to the individual tax base of the entity must be included for the purposes of determining the tax base of the tax group, both on the pages dedicated to the Balance Sheet, Profit and Loss Account and Statement of changes in net worth, as well as the data relating to the liquidation of the part that will apply the tax consolidation regime.

Joint note from the Tax Management and Financial and Tax Inspection Departments - May 2019