Limitations on Deductions for Double Taxation, Impairment and Other Provisions and Negative Tax Base Set-Off

RDL 3/2016 article 3.1.1,3 BOE 12.03

With effect for tax periods beginning on or after 01/01/2016, for taxpayers with a net turnover of at least 20 million euros in the twelve months preceding the date the tax period begins, the following limitations are set (Corporate Tax Act, 15th additional provision and 36th transitional provision drafting RDL 3/2016):

1) To avoid double taxation the applicable amount set for the following deductions is limited to 50% of the share of each taxpayer:

  • Tax supported abroad;
  • Dividend and profit sharing collected abroad;
  • Internal due to application of the transitional arrangements provided for shares acquired in the tax periods previous to 2015; and
  • Those applicable in the International Tax Transparency System for tax effectively paid abroad due to dividends or profits sharing, and taxes substantially similar to Corporate Tax effectively satisfied by the non - resident entity, corresponding to the positive income imputed in the tax base. 

2) The amount of negative tax bases set-offs, provisions for impaired loans and other assets, and certain provisions, is limited as follows:

  • Net turnover less than 20 million euros:
    • Negative tax base set-off: the general limit of 60% (70% for tax periods beginning on or after 1-12017) of the tax base prior to the implementation of the capitalization reserve and its set-off, is applied.
    • Provisions for impairment of loans and other assets and certain provisions: limited to 60% (70% for the years beginning on or after 1.1.2017) of the positive tax base prior to the integration of these expenses, the implementation of the capitalization reserve and the negative tax base set-off
  • Net turnover equal or greater than 20 million but less than 60 million euros:
    • Negative tax base set-off: The maximum amount is limited to 50% of the tax base prior to the implementation of the capitalization reserve and its set-off
    • Provisions for impairment of loans and other assets and certain provisions: limited to 50% of the positive tax base prior to the integration of these expenses, the implementation of the capitalization reserve and the negative tax base set-off
  • Net turnover greater than 60 million euros:
    • Negative tax base set-off: The maximum amount is limited to 25% of the tax base prior to the implementation of the capitalization reserve and its set-off.
    • Provisions for impairment of loans and other assets and certain provisions: limited to 25% of the positive tax base prior to the integration of these expenses, the implementation of the capitalization reserve and the negative tax base set-off.
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