Corporate tax: company groups

With the evolution of business activities, the creation of commercial companies has been accompanied by the configuration of groups of companies in which there is a parent company and a series of related companies. In this post, we want to focus on the groups of companies and the incidence of Corporate Tax.

What is a group of companies or entities?

We speak of a group of companies or entities when a dominant entity and a series of dependent entities exist. The link between the companies occurs in the financial, economic and organisational spheres.

The controlling entity will be the one that meets the following requirements:

• Have their legal personality and be subject to and not exempt from Corporate Income Tax.
• Hold a direct or indirect holding of at least 75% of the share capital of the other dependent companies, representing the majority of the voting rights.
• Maintain your participation and voting rights during the tax period.
• Not be dependent on another entity.

Groups of companies have been used for various purposes:

• Limitation of liability to third parties.
• Expansion beyond the country of origin.
• The diversification of activities.
• The need to attract investors.

The advantage of groups of companies in Corporate Tax

In addition to the purposes that we have seen, other aspects taken into account when forming groups of companies are the tax advantages.

In the case of Corporation Tax, when specific requirements are met, they may benefit from the fiscal consolidation regime, which implies the waiver of the applicable individual regime, to be able to pay taxes as a group of companies that represent a single taxpayer.

The tax base for the group Corporation Tax is calculated by adding the individual tax bases of the group entities considering the following issues:

• The financial expense deduction limit refers to the tax group.
• The capitalisation reserve, the levelling reserve, or the provisions of article 11.12 of the Corporation Tax Law are not included.
• Negative tax bases corresponding to the entity in its individual regime will not be offset.

For the presentation of the IS, aspects such as:

• The tax period, which will be in that of the representative entity.
• The tax rate will also be that of the representative entity unless a credit entity is in the group.
• The deductions and bonuses will be those that exist in the general regime.
• The parent company must present the settlements of instalment payments in the IS.
• The withholdings that all the entities that are part of the group have borne.

However, not only does the parent entity have formal obligations for IS, but the dependent entities must also present the corresponding self-assessment.