For fiscal years starting as from January 01, 2017, a new tax treatment applies to losses deriving from portfolio sales.
Royal Decree 3 /2016 eliminates the tax deduction of such losses deriving from portfolio investments which are entitled to the exemption on dividends and on profits deriving from their sale.
If your company has portfolio investments, it is of your interest to learn more about the Spanish Corporate income tax consequences applying to portfolio sales generating an accounting loss.
✔ The “symmetric” tax treatment of the exemption vs losses from portfolio sales
The new tax measures have ruled out what is known as a “symmetric” tax treatment between positive income obtained in the transfer of portfolio and the losses deriving from such transfers.
Whenever positive income is not taxed due to the application of the exemption to avoid double taxation, losses deriving from the transfer of portfolio entitled to such exemption are not tax deductible.
✔ Which are the concrete cases subject to these limitations
Losses are not tax deductible whenever one of the following circumstances occur:
- When, at any moment in the year preceding to the sale, a minimum 5% interest is held or when such interest has an acquisition cost exceeding 20 million €; or,
- When the minimum taxation level of 10% is not met, if the interest is held in a non – resident company, save where a double taxation treaty with exchange of information clause applies. This requirement of minimum taxation is never met when the participated entity is tax – resident in a tax haven.
✔ The only case in which the loss is tax – deductible is when the participated entity is extinguished, (but not due to a restructuring process). Such loss shall, however, be reduced in the amount of dividends entitled to the exemption or double taxation relief, received in the last 10 years.
✔ Although the nominal Corporate income tax rate has not been modified, as it is maintained in 25%, this measure is a new example of the “tax result enlargement” which, in practice, is equivalent to an increase of the tax rate, given the higher tax pressure that it entails for companies.