Newly created entities that are part of a group cannot apply the 15% rate

The application of the reduced tax rate for newly created entities is a tax benefit conditioned on strict compliance with legal requirements. Recently, the Dirección General de Tributos (DGT) has clarified the scope of this benefit in relation to ownership structure and corporate control.

What the DGT has ruled

The inquiry focused on determining whether a newly created entity could benefit from the reduced tax rate of 15% provided for in Article 29.1 of the Law on Corporate Income Tax (LIS). The administration has ruled that, to access this rate, the company must not be part of a group of companies according to the definition in Article 42 of the Commercial Code.

In the case analyzed, the entity was controlled by its sole shareholder, which implies the existence of a group structure. Therefore, the DGT concludes that the entity does not meet the requirement of independence necessary to benefit from the 15% rate intended for companies that are born without a pre-existing group structure.

What this means for you

If you are incorporating a company that will be controlled by another company or that will form part of a business group, you will not be able to apply the 15% reduced rate from its creation. This error in interpreting the regulations could lead to an incorrect settlement of Corporate Income Tax (IS) and potential penalties from the Administration.

Nevertheless, exclusion from this specific rate does not prevent access to other tax benefits. The regulations allow for the application of other reduced rates based on turnover, provided that the company is not classified as a holding company.

What you should do

It is necessary to analyze the ownership structure and control of the company before determining the applicable tax rate. It must be verified whether the corporate configuration fits the definition of a group under the Commercial Code to avoid errors in the Corporate Income Tax declaration. Each business incorporation scenario requires a technical assessment of current regulations to identify the correct tax rate according to the activity and capital structure.