Discover corporate 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 exist and what the requirements are for taking advantage of them.
Let's go with summary! 👇
Corporate Tax Deductions: what are they?
To talk about Corporate Income Tax deductions, it is first necessary to clarify what this tax is and what we mean by deductions.
Corporate Income Tax (IS)
Corporation tax, also known as income tax, is a state tax that legal entities must pay.
☝️ This tax is levied on 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 office grants to the taxpayer with reference to his deductible expenses. In short, they are extraordinary tax incentives for the purpose of contributing to certain activities.
☝️ Deductible expenses are those that can be subtracted from gross income in order to obtain a reduction in the Administration's taxes.
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 look at the latter in more detail.
Deductions for encouraging technological development and innovation
Deductions for R&D activities
👉 Included in article 35.1. LIS.
| Deduction | Reason |
| 25% | Expenses up to the average of the previous 2 years. |
| 42% | Expenditure above the average of the previous 2 years. |
| 17% | Expenditure on qualified personnel. |
| 8% | R&D investments (excluding buildings and land). |
Deduction for technological innovation activities
👉 Included in article 35.2. LIS.
| Deduction | Reason |
| 12% | Expenses resulting from technological innovation. |
Deductions for cultural incentives
Deductions for investments in Spanish film productions.
👉 Included in article 36.1. LIS.
| Deduction | Reason |
| 20% | Investments up to 1 000 000 €. |
| 18% | Investments above 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 Spanish territory, less than €1 000 000. |
Deduction for the production of certain live performances
👉 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 employees, with reference to the unemployment benefit recognised for the employee hired. |
Deduction for job creation for the disabled
👉 Included in article 38 LIS.
| Deduction | Reason |
| 9 000 € | Every 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 of more than 65%. |
Requirements for the application of deductions
In order to qualify for the above-mentioned deductions, SMEs have to fulfil different requirements.
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.
These requirements apply to both SMEs and the self-employed (who apply their personal income tax deductions).
Corporate income tax relief: they too
Finally, it should be noted that the Law also establishes certain allowances linked to economic or social policy issues (Articles 33 and 34).
The following allowances are worth highlighting
- Investments in Ceuta and Melilla: 50% for income obtained and companies that carry 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 deductions of the Corporate Tax, which ones are you going to apply in your company?
Article translated from Spanish