19 January, 2017

Portfolio Impairment Losses – Mandatory Reversion

The Royal Decree 3 / 2016 has been passed with the aim of achieving an increase of tax collection which allows meeting the commitments to fiscal consolidation agreed by Spain with the EU.

The Mandatory Reversion of Portfolio Impairment Losses


Spanish Royal Decree 3 / 2016, which was approved by the Spanish Government on December 03, obliges corporations to be taxed for portfolio impairment losses that were considered as tax deductible in fiscal year previous to 2013, through their automatic reversal, as we had anticipated in a previous post.

This measure implies a new twist towards greater tax pressure for Spanish corporations. As it enters into force in fiscal years starting January 01, 2016, it will have to be taken into account when calculating the Corporate income tax expense of fiscal year 2016.


Royal Decree 3 / 2016 has been passed with the aim of achieving an increase of tax collection which allows meeting the commitments to fiscal consolidation agreed by Spain with the EU. In the area of Corporate income tax, such increase is achieved through an increase of taxable results as well with measures to assure an adequate level of tax collection.

✔ The automatic reversal of portfolio impairment losses is included within the first group (as it consists in a new increase of Corporations’ taxable results). Let us remind you that, since fiscal year 2013, the possibility to deduct portfolio impairment losses was eliminated. A transitory system was passed, to regulate the recovery of such impairment, when it had been considered as tax – deductible in fiscal years starting before January 01, 2013:

  1. When the portfolio’s equity at the end of the fiscal year exceeds that existing at the beginning.

  2. Upon the collection of dividends which qualify as revenues.

✔ With this new measure, the before – mentioned reversal rule is maintained but, at the same time, a minimum annual reversal enters into force. It implies that the balance pending reversal shall be taxed through the first five fiscal years starting from January 01, 2016.

If, due to the application of the existing general reversal system, an amount greater than the minimum required is taxed, the balance pending taxation shall be taxed in equal parts through the subsequent fiscal years up until completion of the five years term.

If the portfolio is transferred, then the amounts pending reversal shall be taxed up to the limit of the positive difference resulting from the transfer.

✔ Consequently and in fiscal years starting as from 2016, corporations that were allowed to deduct these impairment losses shall be obliged to be taxed on a straight – line five fiscal years period, irrespective of whether or not the portfolio value is recovered, being subject to a new taxation increase.


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