Partially exempt entities

According to Law 27/2014 ( LIS ) we can distinguish two types of partially exempt entities:

Firstly, those regulated in Article 9(2) of the LIS "non-profit entities and institutions to which Title II of Law 49/2002, of 23 December, on the tax regime for non-profit entities and tax incentives for patronage" is applicable. This regime is voluntary, so that it can be applied by entities that, fulfilling the requirements of Title II of Law 49/2002, opt for it and communicate the option to the tax authorities through the census declaration form 036.

Secondly, those listed in section 3 of said article 9 “entities partially exempt from the Tax under the terms provided in chapter XIV of title VII of the LIS”. For these entities, the application of this special tax regime is mandatory and cannot be waived in order to pay taxes under the general IS regime and does not require any administrative act of recognition.

In summary, we can distinguish two types of partially exempt entities:

1. Foundations, associations and other non-profit organisations, under the terms provided for in Title II of Law 49/2002, of 23 December, on the tax regime for non-profit organisations and tax incentives for patronage, which comply with the requirements established in Article 3 of the aforementioned Law.

2. The following entities:

   • Non-profit entities and institutions that do not qualify for the tax regime established in Law 49/2002.

   • Unions, federations and confederations of cooperatives.

   • Professional associations, business associations, official Chambers and trade unions.

   • Employment Promotion Funds set up under Article 22 of Act 27/1984, of 26 July, on restructuring and re-industrialisation.

   • Mutual Funds associated with Social Security, regulated in the revised text of the General Law on Social Security, approved by Royal Legislative Decree 1/1994, of 20 June.

   • The public law entity Puertos del Estado and the respective public law entities of the Autonomous Communities.

     For tax periods starting on or after January 1, 2020, which have not ended by July 9, 2020 port authorities are removed from the list of partially exempt entities in article 9.3 of the LIS. In this way, the Port Authorities stop applying the tax regime for partially exempt entities regulated in Chapter XIV of Title VII of the LIS, and are now taxed under the general regime of Corporate Tax .

The tax regime for these entities, regulated in Chapter XIV of Title VII of the LIS, is basically characterised by the fact that income is exempt:

• Proceeds from the activities constituting its objects, to the extent that they are not business activities.

• Proceeds from acquisitions and transfers for profit to the extent that they are made in pursuit of the objects of the company.

• Generated in the transfer for valuable consideration of assets assigned to its corporate purpose, provided that the total amount obtained is reinvested in other investments related to its corporate purpose or specific purpose.

In addition, their tax regime is complemented by certain special features as regards the composition of the tax base and their rates of taxation in this tax.

Finally, there are other specific cases of partial exemption such as those applicable to political parties, the Corporación de Reservas Estratégicas de Productos Petrolíferos and the Consorcio de Compensación de Seguros.

Entities partially exempt from sections 2, 3 and 4 of article 9 of the LIS will be required to declare all of their income, exempt and non-exempt, in accordance with article 124.3 of the LIS.

However, the taxpayers referred to in section 3 of article 9 will not be required to file a declaration when they meet the following requirements:

1. That their total income does not exceed 75,000 euros per year.

2. That the income corresponding to non-exempt income does not exceed 2,000 euros per year.

3. All non-exempt income obtained is subject to withholding.