The Official State Gazette has just published the General State Budget for 2021, which will come into force at the beginning of the new year 2021. It modifies articles 21 and 32 of the Corporate Income Tax Law 27/2014.
Article 21 of the LIS. Exemption on dividends and income derived from the transfer of equity securities of resident and non-resident entities in Spanish territory.
From 1 January 2021, only dividends or income derived from the transfer of securities that have a direct or indirect participation percentage greater than 5% in the capital of the entity from which these dividends or capital gains originate will be eligible for the exemption, regardless of the acquisition value of the participation.
Consequently, dividends or capital gains from holdings of less than 5% but with acquisition values exceeding 20 million euros will no longer be eligible for the exemption under Article 21 of the LIS as before.
Furthermore, a 95% limit is introduced on the exemption. The amount of dividends and capital gains to which the exemption for management expenses related to these holdings was to be applied is reduced by 5%.
However, this 5 percent reduction of the exemption will not apply when the following circumstances occur:
- The dividends must be received by an entity whose net turnover in the immediately preceding tax period is less than 40 million euros. Furthermore, this entity must not be a holding company, nor part of a group of companies prior to its incorporation, nor hold a stake in the equity of another entity equal to or greater than 5 percent prior to its incorporation.
- The dividends come from an entity established after January 1, 2021, in which the entire capital or equity is held directly and since its incorporation
- Dividends are received in the tax periods ending in the 3 years immediately following the year of incorporation of the entity that distributes them.
Article 23 of the LIS. Deduction to avoid international economic double taxation of dividends and profit shares
Following the line of the modification of article 21 of the LIS, the requirement relating to participation is limited to those dividends whose percentage in the entity is at least 5%, regardless of whether the acquisition value exceeded 20 million euros.
For the purpose of calculating the deduction for international double taxation, the full amount of the dividends will be calculated, reducing by 5% for management expenses related to said shares. Any amount exceeding this limit will not be considered a tax-deductible expense.
If you require further information or have any questions, please contact us via email at ambit@ambitassessor.com or at our offices.
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A graduate in Business Administration from the University of Barcelona, she continued her education with a Postgraduate Diploma in Accounting and Management Control from Pompeu Fabra University, and completed various courses in tax and fiscal matters offered by the Terrassa Chamber of Commerce, the Barcelona Bar Association, and the Center for Financial Studies. Before joining Àmbit Assessor in 2001 as a tax and accounting consultant, she worked as an administrative assistant at Caixa Manresa and Banc Sabadell and as a tax information call center operator at the Spanish Tax Agency. For three years, she served as treasurer of the L'Alzinar Recreational and Cultural Society, a position she held concurrently with her work at Àmbit Assessor.
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