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Spain: Corporate income tax “prepayment” rules under new law

Spain: Corporate income tax “prepayment” rules

Royal Decree-Law 2/2016 (30 September 2016) focuses on reducing the public deficit by introducing corporate income tax measures that aim at raising revenue.


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In general, there are tax measures that provide for:

  • An increase of the rate applicable to corporate income tax “prepayments” tax payments, with a rate increase from 17% to 24% over the taxpayer’s corporate income tax base (or 29% for certain taxpayers).
  • A new mandatory minimum corporate income tax prepayment of 23% over the taxpayer’s accounting profits (or 25% for certain taxpayers)—the minimum corporate income tax prepayment implies that holding companies would be requested to make payments on account, even if their total income amounts were tax-exempt.

These new measures affect to companies with a turnover exceeding €10 million during the 12 months prior to the beginning of the tax period, and have an effective date of 30 September 2016.


The Spanish corporate income tax law provides for three “prepayments” of income tax, with the prepayments due each year on the following dates:

  • 20 April
  • 20 October
  • 20 December

The corporate income tax prepayments are made toward the taxpayer’s account of its final corporate income tax liability, with payment due within the 25 calendar days following six months after the end of the taxpayer’s fiscal year.

Until the new rules effective beginning October 2016, corporate income tax prepayments were viewed as a mere advanced payment of the final corporate income tax debt (that is, the amounts of the corporate income tax interim or installment payments made during the year were subtracted from the final income tax liability reported with the filing of the final corporate income tax return). In particular, for large companies, the prepayments were simply calculated at a rate of 17% of  the taxpayer’s corporate income tax base arising over the first three, nine, and eleven months of the calendar year. Consequently, holding companies with only tax-exempt income did not make prepayments.

Royal Decree-Law 2/2016

The effect of Royal Decree-Law 2/2016 is expected to increase the amount of the corporate income tax prepayment significantly for companies with turnover exceeding €10 million. The new measures:

  • Increase the tax rate from 17% to 24% of the taxable base (or to 29% for taxpayers in certain industries such as the financial or banking sector, and the oil and gas sector)
  • Provide for a “minimum payment” set at 23% of the taxpayer’s “accounting income” (with the minimum payment set at 25% for financial institutions or companies engaged in oil exploitation activities)

The minimum payment rule applies without regard to potential tax adjustments, if any (for example, adjustments allowed for a participation exemption on dividends or gains derived from transfer of shares) and without regard for tax loss offsets, if any.

In certain exceptional instances, certain income derived from debt-reductions taking place within the context of bankruptcy proceedings, as well as from the capitalization of credits, will be excluded from the corporate income tax minimum prepayment base. Also, certain entities applying special reduced rates of corporate income tax—e.g., SOCIMIs (as REITs in Spain are referred to), collective investment vehicles, pension funds, etc.—are not affected by this new prepayment rule.

Effects on holding companies

The provisions under Royal Decree-Law 2/2016 are not temporary measures, and do not provide any specific rules with respect to holding companies—meaning that the new corporate income tax minimum prepayment provisions also apply to holding companies that exceed the turnover threshold. Dividends and capital gains are, in principle, included in the turnover of a holding company.

KPMG observation

The new measures will have implications for the cash management of large companies and their accounting profits, given that the new rules not only accelerate payments of a greater portion of the corporate income tax liability from the date of the filing of the final income tax return, but in many instances, taxpayers can be expected to pay much more in tax as prepayments than would be paid as final tax. In such instances, companies would want to file requests for refund of these excess amounts paid when filing their final tax returns.

For holding companies, note that in calculating the corporate income tax prepayment amount over the accounting profits, no tax adjustments (for example, with respect to a participation exemption pursuant to article 21 of the corporate income tax law) or tax loss carryforwards would be available to reduce the amount of tax due under the corporate income tax minimum prepayment regime.

Holding companies need to consider reviewing the calendar of their transactions (and the transactions of their subsidiaries) as well as potential dividend distributions or transfer of shares, and evaluate the possible application of the minimum payment provisions under the new regime. 

Lastly, it is expected that some Spanish companies directly affected by the minimum payment rules may consider challenging the new tax measures as being contrary to protections afforded under the Spanish Constitution.


For more information, contact a tax professional with KPMG’s Latin America Markets practice:

Devon Bodoh | +1 (202) 533 5681 |

Alfonso A-Pallete | +1 (305) 913 2789 |


Or with the KPMG member firm in Spain

Pelyao Oraa | +34 91 456 3841 |

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