What are civil companies?

Distinction between a partnership and community of goods

It is important to distinguish between civil society and community of property. Regarding this issue, article 1665 of the Civil Code establishes that "a partnership is a contract by which two or more persons are obliged to pool money, property or industry with the intention of sharing the profits among themselves." On the other hand, article 392 of the Civil Code indicates that "there is community of property when the ownership of a thing or a right belongs undivided to several persons."

In other words, as long as there is an intention to associate in order to carry out an activity, we are dealing with a company, and not a community of goods. On the other hand, the Legal Service of the Tax Agency provides that "it is considered that a mere formal distinction, based on the name of community of property or civil society, is not sufficient for the acceptance by the AEAT of what is stated by the interested parties, and must be subject to due qualification, especially when the applicable rules are mandatory and have important tax consequences for the constituents of the different entities, a tax regime that cannot be left to the discretion of the partners, but must be adjusted to the correct nature of the entity and the activity developed."

Therefore, and in accordance with the above, in the case of communities of goods that are set up to pool money, goods or industry with the aim of obtaining common profits and gains, we will be in the presence of a civil company, which, as of 1 January 2016, will be subject to corporation tax.

In conclusion, since the only taxpayer that is incorporated into the Corporate Tax are civil companies with a commercial purpose, the community of property will continue to pay taxes as an entity in attribution of income in accordance with the special regime regulated in Section 2 of Title X of the LIRPF .