Changes to corporate tax law ushered in by Royal Decree-Law 12/2012, of March 30th

10 May 2012

On March 31st, the Official State Gazette published Royal Decree-law 12/2012 introducing various fiscal and administrative measures aimed at reducing the public deficit. The measures are in line with those introduced by Royal Decree-law 9/2011 on August 19th, which focused on tax revenue withholdings.

The most significant measures affect the corporate tax, resulting in a general increase in the tax liability. They must be taken into account when calculating the first split payment on account of the tax which is due on April 20, 2012.

The following measures are amongst the most significant:

  • Limits on the deductible for financial costs associated with debts incurred by the company group in the acquisition of shares in capital or own funds of other entities of the group unless the existence of valid economic motives is proven.
  • General limits on the deductions for net financial costs exceeding the limit of 30% of operating income for the fiscal year, although, in any event, anything below 1 million euros is deductible.
  • Repeal of unrestricted depreciation on new elements of fixed real assets and real estate investments made after March 31, 2012. For taxpayers who had made investments before this date and have yet to recoup investment amounts, they can continue to apply the tax incentive under the same conditions. However, in the tax periods commencing in 2012 and 2013, large companies that have made investments before this date and that have yet to recoup investment amounts can use accelerated depreciation with certain limits.
  • – The establishment of a minimum split payment for companies whose accounting profit or loss exceeds 20,000,000 euros. It will be 8 or 4%, depending on the nature of the revenue, for the fiscal year. The split payment due by April 20th will be 4 or 2% for companies subject to the aforementioned 8 or 4% percentages.
  • Reduction of between 5 and 1% of the maximum annual deductible limit for intangible fixed assets associated with goodwill, both for acquisition of entities as well as corporate restructuring. Thus, the reduction set by Royal Decree-law 9/2011 for all goodwill for the 2012 and 2013 fiscal years has been extended.
  • The system of exemptions for the sale of shares in non-resident entities has been made more flexible. Proportionality as a function of the time in which these requirements have been met will now be used as criteria.

Furthermore, a special declaration for undeclared income has been approved for taxpayers who want to voluntarily comply with outstanding tax obligations. The percentage of the total tax liability that limits the application of deductions has been reduced from 35 to 25%, including the deduction for reinvestment of excess profits.

For further information, please contact María Blanco: mblanco@mmmm.es