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V1664-15 28 May 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · gastos financieros

Application and mechanics of financial expense deductibility limits (arts. 15.h and 16 LIS) and transitional regime for participative loans and pre-June 2014 acquisition operations

A private equity association seeks to coordinate the non-deductibility under article 15.h) LIS (group financing expenses for acquiring group shares) with the general 30% operating profit limit under article 16 LIS and the additional debt acquisition limit under article 16.5 LIS. The DGT establishes the order: first exclude non-deductible expenses under article 15.h); then apply successively the additional limit under article 16.5 and the general limit under article 16.1. It details the mechanics of reducing acquisition debt from 70% to 30% over eight annual instalments and outlines transitional provisions preserving the deductibility of participative loans and pre-June 2014 restructuring operations.

The question raised

1. In the case of entities having financial expenses affected by the provisions of Article 15.h) and 16 of the Corporate Income Tax Law, how to proceed for the application of both rules.

The DGT's ruling

The application of the limits to the deductibility of financial expenses in the CIT follows a specific order: first, Article 15.h) is applied (definitive exclusion of intra-group financial expenses intended to acquire group holdings without valid economic reasons); subsequently, to the remaining financial expenses, the additional limit of Article 16.5 is applied (30% of the acquiring entity's operating profit for debt used to acquire holdings) and, finally, the general limit of Article 16.1 (30% of the consolidated operating profit) with a minimum of 1 million euros. Article 16.5 does not apply if the initial debt does not exceed 70% of the acquisition price and is proportionally reduced to 30% over 8 years. DT17 excludes from the non-deductibility of Article 15.a) participating loans granted before June 20, 2014. DT18 excludes from the limitation of Article 16.5 restructuring operations prior to that date.

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