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V1193-20 30 April 2020 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · gasto financiero

Interest expenses from issuance premium loans are deductible under LIS article 16 limits

A company asked whether financing costs from a loan used to pay an issuance premium to its sole shareholder are deductible. The DGT confirms they are deductible provided they meet general accounting recording, accrual and justification requirements, subject to financial expense limits.

The question raised

Whether the financial expense recorded by the consulting entity derived from the loan contracted by the consulting entity for the proportional part of the debt contracted to distribute a share premium to its sole shareholder shall be considered tax deductible, with only the limits established in articles 20 of the recast text of the Corporate Income Tax Law, approved by Royal Legislative Decree 4/2004, of 5 March, and 16 of Law 27/2014, of 27 November, on Corporate Income Tax, being applicable for the 2015 fiscal years and following, insofar as it meets the general requirements of accounting registration and temporal imputation according to the accrual principle.

The DGT's ruling

Financial expenses derived from external financing received are tax deductible if they meet the conditions of accounting registration, accrual-based imputation, and documentary justification, and are not subject to a specific prohibition in the LIS. These expenses are subject to the limitation of article 16 of the LIS, which shall be applied to the tax group in the event of tax consolidation pursuant to article 63.a) of the LIS. Likewise, as they are transactions between related parties, they must be valued at market value according to article 18 of the LIS.

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