Companies with turnover below 1 million euros may apply reduced Corporate Income Tax rates

Access to tax benefits in Corporate Income Tax (IS) is often erroneously associated with micro-enterprise status. However, current regulations establish different criteria for the application of reduced tax rates that companies must know for their correct settlement.

What the DGT has ruled

The Directorate General of Taxes (DGT) has clarified that the right to apply the tax rate scales provided for in Article 29.1 of the Corporate Income Tax Law (LIS) and in its forty-fourth transitional provision is not conditioned by the number of employees or the accounting classification of the entity.

The determining criterion is the net amount of the turnover from the immediately preceding tax period. If this amount is less than 1,000,000 euros, the entity may benefit from reduced tax rates, even if it has a workforce of more than 10 employees or if it does not meet the requirements to be considered a micro-enterprise under commercial or accounting criteria.

What it means for you

For companies operating with a contained turnover volume, this criterion provides significant legal certainty. It means that the size of the workforce does not act as an obstacle to accessing a lower tax burden, provided that the established turnover threshold is met.

Entities must focus their control on the net amount of the turnover from the previous fiscal year to determine which tax rate scale they should apply in the tax settlement. Micro-enterprise status is a distinct concept that does not limit this specific tax benefit.

What should be done

It is necessary to verify the net amount of the turnover from the immediately preceding fiscal year to confirm the possibility of applying the reduced rates. Since the application of these rates depends on an objective and verifiable datum, the correct determination of the turnover is fundamental to avoid errors in the Corporate Income Tax settlement and possible requests from the Administration.