Aspects for analysis in civil companies
How the first balance sheet is drawn up and how transitional income is processed.Remuneration of working partners and deductibility of expenditure
Civil companies with a commercial purpose are corporate taxpayers under the same conditions as any other taxpayer, and may avail themselves of the special regimes regulated in Title VII of the LIS if they meet the requirements established for each of the regimes set out therein.
Therefore, all the articles of the LIS will be applicable to them as regards determination of the tax base, temporary imputation, computable income, deductible and non-deductible expenses, tax rates, deductions, instalment payments, etc.
The following are two issues that have given rise to doubts in civil societies:
With regard to the preparation of the first balance sheet, as corporate taxpayers, it should be borne in mind that the fourth section of the thirty-second transitory provision of the LIS provides that in the case of civil companies subject to corporate tax, it shall be understood that on 1 January 2016, for tax purposes, all of their equity consists of contributions from shareholders, up to the limit of the difference between the value of tangible fixed assets and real estate investments, as reflected in the corresponding record books, and the liabilities payable, unless the existence of other assets and liabilities is proven, unless the existence of other assets and liabilities is proven.
Shares in the civil law partnership acquired prior to 1 January 2016 shall have as their acquisition value the value deriving from the provisions of the preceding paragraph.
An entity is only required to include property, plant and equipment and investment property in its assets if they were included in its investment property register in the year prior to 1 January 2016 because they are owned by the entity.
The tax effects of the change from being taxed as an entity in attribution of income to being a taxpayer of the IS, both for the company and its partners, are as follows:
Accrued income:In the case of income for which the allocation criterion has been determined according to the rules of IRPF, in particular the chargeability criterion and not the accrual criterion, where, on the contrary, once the company becomes an IS taxpayer, all income included in its tax base is determined according to the accrual principle.Therefore, it is possible that there is income that has accrued during the period of time in which the company has been taxed under the income attribution system and, therefore, has not been attributed to the partners of the company, as it has not yet been due. In these situations, the LIS establishes that such income is included in the taxable income of the civil company in the first tax period in which the company is taxed under the general system, i.e. in the first tax period starting on or after 1-1-2016.
Unearned income:This is the case of income whose imputation criterion has been determined according to the income tax liability criterion and, therefore, has been attributed to the partners of the civil partnership, but has not accrued according to the IS criterion, so that when the company becomes a taxpayer of the IS, the accrual of such income would take place, which would imply double taxation of such income.In order to avoid such situations, a special rule is established whereby income that has been included in the tax base of the civil law partnership in application of the system of attribution of income is not included again in that partnership on the occasion of its accrual.
Increase in value of assets:The elements of the assets of the civil law partnership incorporating unrealised capital gains at the time of the changeover to the general regime have not been included in the tax base of the partnership because they have not yet been generated, so that if these capital gains become apparent when the civil law partnership is taxed under the general regime, they would be included in the tax base of the partnership and taxed at the general rate, even if part of them were generated in previous periods when the partnership was taxed under the attribution regime.
All accounting expenses will be tax deductible for corporate income tax purposes, provided that they meet the legally established conditions, in terms of accounting registration, accrual-based allocation, correlation of income and expenses, and documentary justification, provided that they are valued at market value, in accordance with the provisions of Article 18 of the LIS, and that they are not considered non-deductible for tax purposes due to the application of any specific provision established in the LIS.
At this point, the provisions of Article 15 of the LIS should be mentioned:Non-deductible expenses include:e) Donations and gifts.Remuneration to directors for the performance of senior management functions, or other functions derived from an employment contract with the entity, shall not be understood to be included in this point e).
By virtue of the foregoing, the expense corresponding to the services rendered by the working partner, for the performance of ordinary tasks other than those inherent to the position of director, shall be considered a tax-deductible expense, provided that such expense meets the aforementioned legal requirements and in particular that such remuneration has been valued at market value in accordance with the terms of Article 18 of the LIS.