Discover corporate income tax deductions and reduce your tax burden!
Whether you are a Sociedad Limitada (S.L.) or a Sociedad Civil (S.C.) with tax domicile in Spain, this article is of interest to you.
Knowing the Corporate Tax deductions in force allows small and medium-sized companies to enjoy a reduction in their taxes.
Read on to find out which Corporate Tax deductions are available and what are the requirements to take advantage of them.
Let's go with summary! 👇
Corporate Tax Deductions: what are they?
To talk about Corporate Income Tax deductions, first it is appropriate to clarify what this tax is and what we understand by deductions.
Corporate Income Tax (IS)
The Corporate Income Tax, also called Income Tax, is a State tax that legal entities must pay.
☝️ This tax is applied to the profits obtained and its general tax rate is 25%.
What do we mean by "deductions"?
A tax deduction (or tax benefit) is a monetary reduction or exemption that the Tax Agency grants to the taxpayer in reference to his deductible expenses. In short, they are extraordinary tax incentives for the purpose of contributing to certain activities.
☝️ We understand by deductible expenses those that can be subtracted from the gross income with the purpose of having a reduction in the taxes of the Administration.
Types of deductions
There are two types of deductions:
- International double taxation deductions, arising from the payment of taxes abroad. They can be legal or economic.
- Deductions to encourage certain activities, introduced to encourage companies to promote and participate in activities that contribute to the creation of national wealth.
Let us take a closer look at the latter.
Deductions for encouraging technological development and innovation
Deduction for R&D activities
👉 Included in article 35.1. LIS.
| Deduction | Reason |
| 25% | Expenses up to the average of the previous 2 years. |
| 42% | Expenses above the average of the previous 2 years. |
| 17% | Qualified personnel expenses. |
| 8% | R&D investments (not including buildings and land). |
Deduction for technological innovation activities
Collected in article 35.2. LIS.
| Deduction | Reason |
| 12% | Expenses resulting from technological innovation. |
Deductions for cultural incentives
Deduction for investments in Spanish film productions.
👉 Included in article 36.1. LIS.
| Deduction | Reason |
| 20% | Investments up to 1 000 000 €. |
| 18% | Investments over 1 000 000 €. |
⚠️ Participation limit of 40% of the total production cost.
Deduction for investments in foreign film productions in Spain.
👉 Included in Article 36.2. LIS.
| Deduction | Reason |
| 15% | Investments made in terms of production in the Spanish territory, less than 1 000 000 €. |
Deduction for the production of certain live shows
👉 Included in article 36.3. LIS.
| Deduction | Reason |
| 20% | Artistic, technical or promotional costs. |
Deductions for employment incentives
Deductions for job creation
👉 Included in article 37 LIS.
| Deduction | Reason |
| 3 000 € | For the first professional under 30 years of age with a permanent contract. |
| 50% | For companies with less than 50 workers, in reference to the unemployment benefit recognized to the hired worker. |
Deduction for job creation for the disabled.
👉 Included in article 38 LIS.
| Deduction | Reason |
| 9 000 € | Each year, for each new person hired with a disability between 33% and 65%. |
| 12 000 € | Each year, for each new person hired with a disability greater than 65%. |
Requirements for the application of deductions
SMEs must meet different requirements to be eligible for the deductions mentioned above.
The expenses or investments must be:
- Related to their economic activity,
- justified (invoices),
- recorded in the accounting books,
- imputed in the tax period in which they accrue.
💡 Said requirements apply to both SMEs and self-employed (which apply their deductions in the IRPF).
Corporate Income Tax allowances: also them
Finally, it must be said that the Law also establishes certain allowances linked to economic or social policy issues (Articles 33 and 34).
The following allowances are worth mentioning
- Investments in Ceuta and Melilla: 50% for income obtained and companies carrying out activities in the territory.
- Investments in local public services: 99% for income from the provision of local public services.
Now that you know the Corporate Income Tax deductions, which ones are you going to apply in your company?
Article translated from Spanish