Limitation of 50% on offsetting tax loss carryforwards in tax groups

As announced in our tax flash published in November 2022 regarding new taxation measures in Spain, last December 21st the Proposition of Law was approved establishing a temporary energy taxation, of credit institutions and financial credit establishments which provides, among others, a temporary modification of the rules to determine the taxable base of tax consolidation groups in Corporate Income Tax.

By application of the modification for fiscal years starting in 2023, the taxable income of the group shall not be determined by aggreging the individual taxable bases, but considering 100% of the positive taxable income and 50% of the negative taxable income. This means that during the period 2023, only 50% of the tax losses of the tax group entities will be taken into account.

In each of the following ten tax periods, tax losses not deducted in 2023 will be recovered in the tax base of the tax group in tenths (that is, between 2024 and 2033). The rule also establishes that this will occur even if any of the entities with losses pending integration in 2023 are excluded from the group.

In the event of loss of the tax consolidation regime or termination of the tax group, the amount of the individual tax losses pending inclusion in the tax base of the group shall be included in the last tax period in which the group is taxed under the tax consolidation regime.

Consequently, for fiscal year 2023, the distribution of profits between the different companies of a consolidated group will have tax relevance. The internal composition of the taxable bases in the group shall deserve a special attention to anticipate the effects of the new rule.

The information contained in this note should not in itself be considered as specific advice on the matter under discussion, but only as a first approach to the subject matter, and it is therefore advisable that the recipients of this note obtain professional advice on their specific case before taking specific measures or actions.

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