Ahead of the upcoming Company Tax declaration of the 2016 financial year, we wish to remind you that all payers of it are required to submit the Company Tax declaration, regardless of whether or not they have carried out activities during the taxation period, or whether or not they have obtained income that is subject to the tax.
Consequently, circumstances such as if the company remains inactive or, if its activity has not resulted in income that is subject to taxation does not exempt the tax payer from the obligation to submit the required declaration.
Who is subject to the Company Tax?
Being subject to the Tax is determined by residency in Spanish territory. Companies that meet one of the following requirements will be considered residents in Spanish territory:
- Those that were established in compliance with Spanish laws.
- Those that have their business address in Spanish territory.
- Those that have their centre of effective management in Spanish territory.
Remember that the Tax Authority may consider that a company based in a country or territory where there is no taxation or that is a tax paradise, is based in Spanish territory when its main assets, either directly or indirectly, consist of assets located or rights that are fulfilled or exercised on Spanish territory, or when their main activity is carried out on it, unless that entity shows that its address and effective management take place in that country or territory, as well as that the establishment and operations of the entity correspond to valid economic motives and significant business reasons other than the simple management of equity or other assets.
Tax payers of the Company Tax will be taxed for all of the income they obtain, regardless of where they earned it and where the payer resides.
As the sole exceptions from the general obligation to declare, the current legislation includes the entities that are declared to be totally exempted by article 9.1 of Company Tax Law (the State, Autonomous Communities, Social Security Management Bodies…) and the partially exempt entities that are referred to in article 9.3 of the same law (not for profit entities; unions, federations and confederations of cooperatives; professional associations, business associations etc…) that comply with the following requirements:
- That the total income does not surpass 75,000 euros per year.
- That the incoming corresponding to non-exempt revenue does not surpass 2,000 euros per year.
- That all the non-exempt revenue obtained is subject to withholding.
And, lastly, joint-owners of commonly-owned mountain land, in relation to tax periods where they do not have incomes subject to Company Tax, or incur any expenses, or make investments that provide the right to a reduction in the taxable base that is specifically applicable to those tax payers.
Civil Societies
From 2016 on, civil societies with a legal personality and business purpose, that has been paying taxes via the income allocation system, will become payers of the Company Tax, However, civil societies that carry out activities relating to farming, livestock, forestry, fishing, mining, as well as professionals in the sense of Law 2/2007 on Professional Companies will continue to pay via personal income tax (IRPF).
If you set up a civil society some time ago that is now inactive, ensure that it was dissolved and liquidated. You should not forget that since 2016 companies with a legal personality and business purpose are payers of Company Tax, and that makes it necessary for them to submit the declaration for that tax each year (even when the company is inactive). Otherwise, the Tax Authority may punish you with a fine of up to 200 euros for each declaration not submitted.
Attention. If you are the administrator of an inactive company and stop submitting declarations, the Tax Authority can impose sanctions. Also, if you do not have the money to pay, the Tax Authority can begin a procedure to establish liability and demand the payments from you as the administrator.
