Which civil companies are subject to the Corporation Tax?

With effect for tax periods commencing on or after 1-1-2016, civil law companies with legal personality are taxpayers of the IS provided that their object is commercial, i.e. they are formed for the purpose of carrying out a commercial activity in the sense of intervening in the market by providing goods and services for profit and, in addition, their agreements are not kept secret among the partners, i.e. when the company contracts in its own name vis-à-vis third parties.In this regard, Article 7 of Law 27/2014 of 27 November on Corporation Tax (hereinafter, LIS) establishes who are taxpayers of the Tax, and specifically section 1.a) indicates that:"The following will be subject to this tax, when resident in Spanish territory:a) legal persons, excluding civil companies not having a commercial purpose. That is to say, civil companies with a commercial purpose are taxpayers of corporation tax.

With regards to when an entity has a commercial purpose, Articles 325 and 326 of the Commercial Code state that a company has a commercial purpose "when it is intended to be carried out on a permanent basis, through a stable and adequate organisation for that purpose and for profit".In short, "to pool money, goods or industry, with the intention of dividing the profits between them".

On the other hand, the Directorate General for Taxes, in various consultations, has expressed the following criteria regarding whether there is a commercial purpose or not:"(...) will be understood as the elaboration of an economic activity involving production, an exchange or a provision of services for the market, within a sector that is not excluded from the commercial sphere.Thus, entities engaged in agricultural, livestock, forestry, mining and professional activities are excluded from being taxpayers of corporation tax, as these activities are outside the commercial sphere".

In this regard, the Tax Agency's Legal Service states that:"the criterion for distinguishing the commercial nature of the purpose would be the existence of a set of material and personal elements organised by the business person for the exercise of a business activity.In other words, the activity must be carried out through a structured organisation in order to participate in commercial transactions, excluding occasionality.For these purposes, in line with various rulings of the Directorate General for Taxes on the subject, the commercial purpose is understood to be the performance of an economic activity of production, exchange or provision of services for the market in a sector not excluded from the commercial sphere.That said, it should be borne in mind that the current Commercial Code indicates that agricultural, forestry, mining and professional activities, regulated by Law 2/2007 of 15 March on Professional Companies, do not have a commercial purpose, as these activities are outside the commercial sphere".

Therefore, in accordance with the consultations of the DGT and the report of the Legal Service of the AEAT cited above, the carrying out of an economic activity of production, exchange or provision of services will be a commercial activity, except for entities engaged in agricultural, livestock, forestry, mining or professional activities.