How to save on the Corporation Tax of 2019

We are approaching the end of the year, the time to take advantage of the opportunities to reduce the tax cost of the Corporation Tax.

Once again the end of the year comes and with it the traditional fiscal closure, trying to take advantage of the opportunities available to us to reduce the next tax bill in the Corporate Tax. Some decisions to be taken before the end of the fiscal year may result in savings in the Corporate Tax. We discuss below some aspects that should be remembered.

Try to defer income to fiscal year 2020

Although the tax rate does not vary, it may be interesting for you to defer income to the year 2020, advancing expenses as appropriate and delaying income from 2019 to 2020, or vice versa, always fulfilling the criteria for temporary allocation.

Patrimonial entity and economic activity concept in the case of leasing of real estate

Entities must verify whether they can be classified as equity entities, which occurs when more than half of their assets are made up of securities or when it is understood that they do not carry out an economic activity.

This classification has tax significance due to the limitations implied by the classification as an equity entity, among others, in the compensation of negative tax bases, non-application of the reduced rate for newly created entities or the regime of small-sized entities.

It can be avoided that a company dedicated to the lease of real estate is considered a patrimonial entity if it has a person employed with a full-time employment contract and sufficient workload. In addition, if it is a group, the concept of economic activity will be determined taking into account all the entities that are part of the aforementioned group, so that the ownership of the real estate can be owned by a group company and the other employee.

Deferred price transactions

This special rule of temporary allocation is also applicable to the provision of services. In addition, income is understood to be proportionally obtained as payments are enforceable, unless the entity decides to apply the accrual criterion, and not when the collection occurs, as was previously the case.

Keep in mind that if an operation carried out in 2019, in which a term has already been demanded, has not been charged, the rent must be integrated, although if at the end of the year 6 months had elapsed since the enforceability, the deduction can be deducted. credit impairment It is always convenient that before an operation with a deferred price, the contract specifies when the deadlines expire.

Amortization

It is advisable that you proceed to review the amortizations that you have been counting to see if they are admitted by the tax rule or if there is the possibility of making the most of this expense to reduce the tax base.

An entity that was not a small company, in 2013 and 2014 had to limit the tax deductible tax deductible to 70% of its amount, and in the 2015 and subsequent periods, the non-deductible expense for such limitation had to revert. Thus, the accounting amortization that is not fiscally deductible for the application of this limitation will not be considered as deterioration and will be deducted from the first tax period that begins within 2015, linearly for a period of 10 years or during the useful life of the asset element, at the option of the taxpayer. Therefore, an expense that was not deductible at 30% reverts, that is, will be deductible at 25%. However, the new LIS established a deduction in the quota of 5% of the amounts that are included in the tax base of the tax period corresponding to the reversal of said adjustment.

Although in 2015 intangibles of indefinite useful life were not amortized in accounting, the tax rule allowed a negative adjustment to the accounting result of 1% of the acquisition value of goodwill and 2% in the case of other intangibles of indefinite useful life . However, as of January 1, 2016, intangible assets ceased to be classified based on whether their useful life is defined or indefinite, and it was based on the consideration that all intangible assets are assets of defined useful life, passing to all intangible fixed assets be amortizable; in principle according to its useful life, and if it could not be estimated reliably, within a period of ten years. For the fiscal years beginning on January 1, 2016, the accounting standard forced them to be amortized in 10 years, while the tax law foresees a maximum deductible expense of twenty-part of its amount (5% per year), which must be taken into account to make the corresponding adjustment to the accounting result.

Stock Valuation

The possibility of choosing different methods of stock valuation is a way of influencing the result. Both the PGC and the PGCPYMES support the FIFO and the Weighted Average Price. Since the tax regulations do not contain specific provisions in relation to this aspect, it is not necessary to make adjustments to the accounting result for the determination of the tax base.

Non-deductible expenses

Accounting expenses that are not fiscally deductible (compensation of own funds, fines and penalties and administrative penalties, surcharges of the executive period and surcharge for extemporaneous declaration without prior requirement, game losses, donations and liberalities must be identified , the expenses of actions contrary to the legal system …), in order to practice the appropriate extra-countable adjustments as positive differences remaining in the accounting result to find the taxable base of the Tax.

If the position of administrator in an entity is remunerated, this must be provided statutory so that the remunerations paid are considered deductible expenses. Specifically, the Tax Law establishes that it is not considered a liberality and therefore a deductible expense, the remuneration to administrators for the performance of senior management functions or for performing other functions derived from a labor contract.

Keep in mind that expenses derived from the termination of the common, special labor relationship or of a commercial relationship such as that of the administrators or members of the Board of Directors that exceed, for each recipient, the greater of the two amounts are not deductible. : 1,000,000 euros, or exempt workers compensation.

Financial expenses

Keep in mind that the deduction of financial expenses is limited to the lesser of the following amounts: 30% of the operating profit for the year or one million euros. If it is a mercantile group, these magnitudes will be measured at the group level.

More than a limitation in the tax deduction of financial expenses, we are faced with a limitation in the temporary allocation in each fiscal year, since the part of these that has not been deducted is allowed to do so in the subsequent tax periods.

Valoración de determinados elementos patrimoniales

In certain cases, there is a divergence between the accounting result and the tax base because the tax rule requires that, when certain operations occur, a different value from the accounting to determine income, positive or negative. The differences generated by the substitution of the book value by the tax value are integrated in the tax base, in the tax period in which they motivate the accrual of an income or an expense, in the case of assets belonging to the current assets, in the tax period in which they are transmitted or derecognised, in the case of non-amortizable equity elements that are part of the fixed assets, in the tax periods that remain of useful life, in the case of amortizable equity elements that are part of the fixed assets, and in the period in which they are received, in the case of services.

The entity must review at the end of the year the related transactions carried out in the tax period.

Reduction of income from certain intangible assets

This reduction applies to positive income from the transfer of the right to use or exploit patents, utility models, complementary certificates of protection of medicines and phytosanitary products, drawings and models, legally protected, derived from research activities and technological development and innovation and advanced registered software that derives from research and development activities.

The amount of the reduction is 60% of a coefficient in which the numerator is made up of the expenses incurred by the transferor directly related to the creation of the asset, including those derived from subcontracting with third parties not related to it, increased by 30 percent and the denominator is constituted by the expenses incurred by the transferor entity directly related to the creation of the asset, including those derived from subcontracting with third parties not related to it, as well as with persons or entities linked to it and the acquisition of the asset.

Capitalization Reserve

This figure is contemplated to encourage reinvestment and capitalization of companies. Thus, if an entity is going to increase its own funds in 2019 with respect to those of 2018, it can reduce its tax base by 10% of the amount of the increase of its own funds to the extent that said increase is maintained for a period of five years and a reserve is provided for the amount of the reduction, duly separated and unavailable during those five years. Therefore, it is convenient for the entity to analyze whether it is convenient to provide the reserve by committing to maintain the funds.

Exemption on dividends and income derived from the transfer of securities representing own funds

In the case of participations in entities that do not have their fiscal residence in Spanish territory, it is required as an additional requirement, for the application of the exemption for dividends or for capital gains when they are transferred, that the entity has been subject and not exempted by a tax foreigners of an identical nature or similar to Corporation Tax, at a nominal rate of at least 10%, and this requirement will be considered fulfilled, when the investee is a resident in a country with which Spain has signed an agreement to avoid international double taxation, which is applicable to it and that contains an information exchange clause and provided that it is not a tax haven, unless it resides in a State of the European Union and a valid economic motive is accredited and the performance of activities economic. Therefore, if an entity intends to establish itself abroad through a subsidiary, it should be taken into account that it may be convenient to do so in a country with an agreement or, at least, with a nominal rate of tax similar to ours of 10% in order to ensure the exemption of repatriated dividends and income obtained in the transfer of its shares.

To apply the exemption for dividends received from resident entities, the direct or indirect participation in the entity that distributes the dividend must be at least 5% or that the acquisition value of the participation is a minimum of 20 million of euros. Therefore, when the entity is going to acquire shares in a company based in our country, the convenience of reaching a participation percentage of at least 5% must be considered, except when the acquisition price of that portfolio is 20 million euros. euros or higher, so that the dividends distributed by that subsidiary or the income obtained if the securities are transferred are exempt. This also requires that participation has been maintained for at least one year. Therefore, if the entity, when it has received a dividend from a subsidiary, without having maintained the same one year, should try to complete it later. Likewise, if you intend to transfer a 5% interest in an entity and a year has not elapsed since you acquired it, you should consider waiting for the term to complete the sale.

Compensation of negative tax bases

There is currently no time limit in relation to the compensation in the future of negative tax bases, so, in a newly created entity that initially has losses, it will be preferable to postpone said compensation to the third year with positive results to be able to take advantage, in the first two, the special rate of 15%.

Remember that the limit is (except for entities whose net amount of the turnover is equal to or greater than 20 million euros, in which the percentage is 50% or 25%) of 70% of the tax base prior to the application of the capitalization reserve and its own compensation. However, in any case, the negative tax base can be compensated up to the amount of one million euros, even if the percentage limit is exceeded.

Any entity that generates in 2019, negative tax bases or that has generated them in previous years, must be prepared for a full verification of it in an extended prescription period of 10 years.

Leveling Reserve

The leveling reserve as a tax incentive for small entities, which allows a reduction of the tax base of up to 10% of its amount with an absolute maximum of one million euros in the year, and that you should know if you Interested in providing it. If the taxpayer has a negative base in the following five years, the same is reduced in the amount of the reduction applied by this reserve and, otherwise, the reduced amounts are added to the positive base of the fifth year, acting in this case As a simple deferral. The truth is that providing it can save tax now and apply the reserve in case of losses in the following 5 years and, if these do not occur, it will become a deferral of the tax from 2019 to 2024.

Reminders:

• You can only deduct for attention to customers and suppliers, at most, an annual amount of 1% of the net amount of the turnover of the tax period.

• New items of property, plant and equipment whose unit value does not exceed 300 euros, with a maximum limit of 25,000 euros in each tax period, can be freely amortized.

• If an entity has carried out any restructuring operation during the year, it must inform the Administration whether or not it will apply the special tax regime, since if it did not do so, it may be sanctioned with a fine of 10,000 euros for each uninformed operation.

• The rate applicable to newly created entities is 15% and will be applicable in the first tax period in which the tax base is positive and in the next. It does not apply to equity companies, as the entity is required to carry out an economic activity.

• In order to deduct the expense for the deterioration of a credit owed by a public law entity, it must be subject to a judicial or arbitral proceeding, so if your company has amounts pending collection of any of them, and provides that They will not be charged within a reasonable time, you can start an arbitration procedure to deduct that amount.

• The deduction for impairment losses due to insolvencies of debtors is only accepted when certain requirements are met: six months after the expiration of the obligation without having been collected, debtor declared in bankruptcy, debtor processed for the lifting of assets and litigious credits. However, small entities may apply a global annual estimate of 1% of existing debtors at the end of the tax period.

• There is an obligation to reverse deducted portfolio impairment losses, which must be included in the tax base at a minimum of one fifth of the losses in the years beginning on January 1, 2016 and in the following four years.

• The deduction for employment creation for workers with disabilities will be applied, which will be 9,000 euros for each person / year of increase in the average number of workers with disabilities by a degree equal to or greater than 33% and 12,000 euros for each person / year of increase in the average number of workers with disabilities by a degree equal to or greater than 65%, hired by the taxpayer, experienced during the tax period, with respect to the average workforce of workers of the same nature of the immediately preceding period.

• The taxpayers of the IS can deduct a certain percentage of the research and development (R&D) or technological innovation expenses incurred in the search for new products or industrial procedures from their liquid quota.

• With effect for the tax periods beginning on or after January 1, 2017, the income obtained by the Port Authorities as a result of the transmission of items of fixed assets are exempted from the Corporation Tax, provided that the total amount of the transfer is intended for the repayment of loans granted by State Ports or by official credit entities to finance investments in fixed assets related to their specific purpose or purpose.