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V0245-17 31 January 2017 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · gastos financieros netos

Derivatives intended for financial hedging count as financial income or expenses for the 30% limit

The taxpayer asks whether income and expenses from derivatives intended to hedge debt, but not accounting-classified as such, should be included in the calculation of net financial expenses. The DGT rules that, to avoid tax asymmetries, these must be treated as hedges if they cover the entity's debt.

The question raised

Confirmation of the consideration as financial expense or income for the purposes of applying Article 16.1 of the Corporate Income Tax Law, regarding the income and expenses recorded in the profit and loss account in relation to the contracted derivative financial instrument that has a direct link to the indebtedness and an unequivocal hedging purpose by limiting the maximum interest rates deriving from the existing debt, but which has not been accounted as such due to current exceptional interest rate circumstances.

The DGT's ruling

The effects of financial hedges linked to indebtedness must be accounted for when determining net financial expenses under Article 16 of the LIS, regardless of their accounting treatment. To avoid asymmetries, income and expenses from derivatives with an unequivocal hedging purpose must maintain such tax classification. Therefore, if the hedged item is an entity's debt, its derivative effects must be integrated into the calculation of net financial expenses.

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