Corporate tax: tax saving mechanisms and their deductions

The Corporate Tax offers very interesting options for tax savings. In this article, we are going to break down the different options so that you can take advantage of them and pay less taxes.

Remember that you must meet the requirements and never exceed the deduction limits in order to apply them.

What is Corporate Tax?

The corporation tax is a direct tax that taxes the income of companies resident in the Spanish state. It is a tax on the company’s profits; like others, it contains deductions, so it is interesting to know all the savings mechanisms it allows.

The latest tax reform, approved on November 27, 2014, has restructured many of the possible deductions and eliminated most bonuses. Even so, there are still many savings possibilities for this tax.

How to save on Corporate Tax?

In taxation, provision is equal to savings. In the case of corporate tax, it is essential to analyze whether the existing deductions can be applicable in our case.

It is essential to remember that the corporate tax law has changed for the 2015 financial year, with important changes.

What deductions can we apply in Corporate Tax?

Despite the elimination of some of them, some interesting deductions remain for our companies, and some newly created ones appear,

Capitalization reserve

It replaces the old deduction for reinvesting extraordinary profits and the recent investment in profits. As long as the necessary requirements are met, a 10% reduction in the tax base will be applied. A reserve must be provisioned for the amount deducted and reflected in the balance sheet, so we must record it separately and with an appropriate title.

On the other hand, the increase in own funds must be sustained during the five years following the closing of the tax period unless the entity experiences accounting losses.

Leveling reserve

It allows to reduce the tax base up to 10% with the condition of not exceeding one million euros. It has been created for small entities, and companies with a financial year of less than 10 million euros are eligible.

The deduction is still being determined because it is conditional on having tax losses during the next five years. If you have benefits, you must return the amount, discounting it previously.

Deductions for R&D&I expenses

They have established an important novelty in the monetization mechanism planned for the deduction in R&D&i. We are offered the possibility of obtaining a discount of 20% of the amount deducted, with an annual maximum of 2 million euros. These may be added to the 3 million already existing in other deductions.

This deduction must be taken into account, as we can never exceed 10% of the net turnover.

Film and performing arts sector

This is the least known deduction for companies. The latest tax reform has increased the percentage of deduction for investments in film productions and audiovisual series. Still, it must be considered that it has introduced a location requirement to promote productions substantially made in Spain.

The deduction in these cases is 20% for the first million euros and two points less if it exceeds that amount. Under no circumstances may the figure exceed 3 million euros.

Finally, for investment in large international productions, a 15% deduction is established for expenses incurred in Spanish territory.

Conclusions

It is very important to assess the tax-saving advantages of Corporate Tax. Many are unaware that they are paying more than they should, and it is usually too late when they realize it.