Changes to the installments of Spanish corporate tax

On September 30, the Spanish acting Cabinet approved Royal Decree 2/2016 introducing tax measures to contribute to the budget deficit reduction imposed by the EU. The decree was publish on the State official newsletter in the afternoon, making it effective on the same day it was approved.

This reform, adds a new provision to Corporate Tax Law 27/2014 and will affect installment payments of big enterprises, as of October 2016.

With the new provision of the Corporate Tax Law, the Spanish acting Government recovers the minimum installments system, established back in 2012 and was in effect until accounting year 2015 in virtue of a transitory provision of the Corporate Tax Law for 2015.

The amendment concerns taxpayers who must apply procedures established on Article 40.3 of the Corporate Tax Law and whose turnover is at least 10 million euros, on the last 12 months before the initial date of the tax period.

Besides establishing a minimum installment for these taxpayers, it changes the percentage applicable to calculate the installments. Which changes from 5/7 of the corporate tax rate redounded down to 19/20 redounded up. For the general corporate tax rate of 25%, the current 17% installment increases to 24%.

In summary, a taxpayer who during the 12 months previous to the beginning of the tax period has obtained a turnover of at least 10 million euros must pay in concept of installments, the higher figure of the following two:
  1. - Current tax period taxable base times 24%, minus period withholdings and previous installments of the same tax period.
  2. - Positive result of the Profits and Loss account times 23%, minus previous installments of the same tax period.

This calculation could void the common practice of negative tax adjustments for determining the taxable base.

Finally, this measure, that could be revised in the future, could be extended until accounting year 2018, when public deficit should be below 3% of GDP.