Limits for offsetting losses of Spanish companies and extension of the offsetting deadline

08.2011

In the context of a severe lack of liquidity in the Spanish public finances and with the purpose of increasing revenue for Corporate Tax collection, on August 19, 2011, the government urgently approved two significant changes for Corporate Tax, by means of a Royal Decree, in relation to offsetting the losses incurred by Spanish companies.

For companies with profits and a turnover exceeding 6 million euros retained losses can be offset up to certain limits which can be up to 50% of the tax base prior to the offsetting depending on the turnover figure. That is, losses (reducing the tax base) may not exceed 50% of the tax base prior to the offsetting. This limit shall solely be applicable, at least for the time being, in 2011, 2012 and 2013.

Additionally, the offsetting period for losses for all corporations is extended from the current term of 15 years to 18 years. It should be noted that this term computes from the first year in which the company earns a profit.