Law 13/2023, of May 24, which modifies Law 58/2003, of December 17, General Tax, in transposition of Council Directive (EU) 2021/514 of March 22, 2021, which modifies Directive 2011/16/EU on administrative cooperation in the field of taxation, and other tax regulations, establishes in its Final Provision 5 a new wording of the deductibility limitation rule of financial expenses contained in article 16 of Law 27/2014, of November 27, on Corporate Tax (hereinafter LIS ).

This regulatory amendment is based on the need to fully adapt the Spanish regulations on the limit of deductibility of financial expenses to the content of Article 4 of Council Directive (EU) 2016/1164, of 12 July 2016. As explained in section VI of the Preamble to Act 13/2023, Spain was granted the derogation regulated in article 11.6 of said Directive. This provision established that "Member States which have national targeted rules for preventing BEPS at 8 August 2016, which are equally effective to the interest limitation rule set out in this Directive, may apply these targeted rules until the end of the first full fiscal year following the date of publication of the agreement between the OECD members on the official website on a minimum standard with regard to BEPS Action 4, but at the latest until 1 January 2024."

The Spanish regulation on the limitation of interest —in the Spanish legislation since Royal Decree-Law 12/2012, of 30 March, introduced it in article 20 of the consolidated text of the Spanish Corporation Tax Act— was considered by the European Commission as equally effective to that established in Article 4 of the Directive, by means of a letter of formal notice dated 8 February 2018. However, in accordance with Article 11.6 of the Directive, Spanish regulations needed to be adapted to Article 4 of the Directive before 1 January 2024. For this purpose, Act 13/2023 introduces two important new elements in the current wording:

• First, it establishes a rule that relates the size of the operating profit over which the limit (30%) of deductibility of net financial expenses is calculated with the taxable amount of Corporation Tax. Thus, the new wording of article 16 of the LIS adds to the old wording (section 1, paragraph 3) a final clause with the following literal: "Under no circumstances will income or expenditure that has not been included in the taxable amount of this Tax be included in the operating profit." The need to consider a taxable operating profit is thus aligned with the provisions of Article 4.2 of the Directive, according to which "the EBITDA shall be calculated by adding back to the income subject to corporate tax in the Member State of the taxpayer the tax-adjusted amounts for exceeding borrowing costs as well as the tax-adjusted amounts for depreciation and amortisation. Tax-exempt income will be excluded from the taxpayer's EBITDA .”

• Second, the rule of subjective exclusion of entities equivalent to credit institutions and insurance companies is removed from section 6 of article 16 of the LIS (letter a). In particular, the following paragraph is removed: “The same treatment will also be applied to mortgage securitization funds, regulated by Law 19/1992, of July 7, on the Regime of Real Estate Investment Companies and Funds and on Mortgage Securitization Funds, and asset securitization funds referred to in Additional Provision Five.2 of Law 3/1994, of April 14, which adapts Spanish legislation on credit to the Second Banking Coordination Directive and introduces other modifications relating to the financial system.”

Finally, although Final Provision 8 of Law 13/2023 establishes that it will enter into force on the day following its publication in the BOE , in the case of the modification of article 16 of the LIS , Final Provision 5 itself establishes that it is introduced "with effect for tax periods beginning on or after January 1, 2024."

You can view the full text of the Act at the following link: Law 13/2023, of May 24 .