19 February, 2015

The tax deduction of assets’ depreciation is accompanied by a new deduction of corporate income tax for 2015

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In fiscal year 2015, the general Spanish Corporate income tax rate is reduced from 30% to 28%, going down to 25% in fiscal year 2016 and onwards.

Despite these being good news, it has a negative impact in the reversion of a temporary measure that has affected big-sized companies, which is the limitation in the tax deduction of assets depreciation.

To avoid this negative effect and assets depreciation, Spanish companies will have the possibility to apply a new tax credit. Let’s see what is it about.

✔In fiscal years  2013 and 2014, companies not qualified as small-sized entities, have reduced the tax deduction of accounting depreciation to 70%, as they were obliged to practice a positive book to tax adjustment of the remaining 30% difference, upon calculation of their taxable base on which the Corporate income tax quote was to be applied.

✔During fiscal years 2015 and onwards, the accounting and assets depreciation that was disallowed will be tax deductible within a straight 10 years period or during the asset’s useful life, at the taxpayer’s election.

However, there is an important note that can not be disregarded and it is the fact that the depreciation was partially disallowed in fiscal years in which the Corporate income tax rate was 30% while its recovery will be done in fiscal years in which such rate is progressively reduced (to 28% and 25%).

✔ To avoid the tax cost that this measure would imply, if it was applied on a stand-alone basis, a new tax credit of 5% (2% in 2015) is available for Spanish taxpayers, on the disallowed depreciation expenses in fiscal years 2013 and 2014.

With this measure, companies not only will practice a negative book to tax adjustment upon calculation of their 2015 taxable base, for the disallowed depreciation, within 10 years or the asset’s useful life, but they will apply a tax credit for the difference in Corporate income tax rates in force when (i) the expenses was considered as non deductible; and, (ii) upon its recovery, as well.


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