At this time of year, most companies are awaiting the deadlines set by the Tax Agency to submit certain tax obligations. This is undoubtedly a key time to carry out an in-depth review of the accounts and to balance them.
In this sense, companies with year-end date on December 23rd, 2023 have until July, 25th to file their annual Corporation Tax (IS) return. This tax is levies on the profits obtained by companies with legal personality resident in Spain during and after its financial year.
Here are the most important facts about this tax to give you an in-depth understanding of what the IS is and how it should be filed to avoid any kind of sanction penalty.
What is Corporate Income Tax?
First of all, you need to understand the function of this tax. As we have already mentioned, IS is a direct tax that is applied to the income obtained by legal entities, including corporations, limited liability companies, cooperatives, foundations, and associations, among others. The tax base is calculated on the basis of the accounting result adjusted in accordance with current tax regulations.
How does the amount of the tax vary?
Accordingly, with the 200 corporate income tax forms filed on July 25th, we will have reached the target and concluded the tax closing of last year’s fiscal year. However, turnover takes on particular relevance since, depending on its amount, the company’s taxation varies as follows:
- One million euros: In order to be able to apply the tax rate of 23%. From January 1st, 2023 companies that have not exceeded this figure in the immediately preceding tax period and are not considered to be asset-holding companies may apply this tax rate.
- Ten million euros: This gives entitlement to the tax incentives for small companies, if this limit has not been reached in the immediately preceding tax period.
- Twenty million euros: To avoid a minimum taxation of 15%. From January 1st, 2022, taxpayers who, in the 12 months prior to the start of the tax period or who are taxed under the consolidation regime, exceed this figure will have a net tax liability that may not be less than 15% of the tax base. This base is adjusted by the equalization reserve and the investment reserve, as appropriate.
However, it is important to highlight that the general rate of IS in Spain is 25%, while other tax-sheltered entities and companies, such as cooperatives, may benefit from the reduced rate.
Emerging companies, in accordance with Law 28/2022, of December, 21st on the promotion of the ecosystem of emerging companies, will be taxed at the rate of 15% under the terms established in Article 29.1 of the LIS in the first tax period in which, having the status of an emerging company, the taxable base is positive as well in the following three, provided that they maintain that status.
As you have seen, it is crucial to file the IS correctly in order to be able to have a good accounting and tax closing. It is necessary for companies like yours to comply with their tax obligations and, in turn, to have the advice of a tax and accounting expert to carry out this process efficiently and effectively.
At LEIALTA we have a team of experts with extensive experience who will help you at all times to take advantage of the benefits and deductions available to optimize your tax burden. Contact us for any queries you may have!
