INDEX
Prologue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Gratitude . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
A bbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
PART I Fundamentals of Spanish Financial Accounting and Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
A. The conceptual and regulatory framework . . . . . . . . . . . . . . . . . . .
23
B. Generally accepted accounting principles in spain . . . . . . . . . . . . .
35
C. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
PART II Financial reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
A. Sales and income in the SGAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49 49
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2. Sales and income in the chart of accounts . . . . . . . . . . . . . . . . . 3. Examples of booking sales and income . . . . . . . . . . . . . . . . . . .
49 51
B. Purchases and expenses in the SGAP . . . . . . . . . . . . . . . . . . . . . . . 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Purchases and expenses in the chart of accounts . . . . . . . . . . . 3. Examples of booking purchases and expenses . . . . . . . . . . . . . .
54 54 56 60
C. Inventory valuation and cost of goods sold . . . . . . . . . . . . . . . . . . . 1. Valuation methods for inventory . . . . . . . . . . . . . . . . . . . . . . . . 2. Example of the use of different methods of inventory valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Notes to Value Added Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62 62 68 71
D. Assets, depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 1. Classification of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Initial value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 4. Tax depreciation rules and limitations . . . . . . . . . . . . . . . . . . . . 5. Notes to leasing and renting . . . . . . . . . . . . . . . . . . . . . . . . . . .
72 72 76 77 78 81
PART III Financial reporting for tax purposes . . . . . . . . . . . . . . . . . . . . . . .
85
A. Tax reporting vs. financial reporting . . . . . . . . . . . . . . . . . . . . . . . .
85
B. Adjustments and reconciliations for tax calculation . . . . . . . . . . . . 1. Temporary attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Amortizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Impairment losses on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Provisions and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Rules of assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Reduction of income from certain intangible assets . . . . . . . . . 9. Charity and social work of savings banks and bank foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Adjustments arising from the application of double taxation relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88 89 95 108 113 117 121 132 139
10
140 142
Index
11. Adjustments arising from the application of special tax systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Acquisition of shares in non-resident entities (For shares acquired prior to 21/12/07) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. Reinvestment of extraordinary profits . . . . . . . . . . . . . . . . . . . 14. SICAV partner: Income from SICAV liquidations . . . . . . . . . . 15. Entities under the income allocation system incorporated abroad with presence on Spanish territory (Art. 38 Royal Legislative Decree 5/2004, of March 5, which approves the consolidated text of the Non-Resident Income Tax Law) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. Specific corrections for entities subject to regional regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. Eliminations pending inclusion by companies leaving a group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. Other corrections to the results of the profit and loss account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
143 174 175 177
178 179 180 181
R eferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
183
A nnex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
185
Detail of the corrections to the results of the profit and loss account in the Corporate Income Tax Standard format (Form 200, pages 12 and 13, Spanish Tax Agency) . . . . . . . . . . . . .
185
Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
189
SGAP Financial statements formats . . . . . . . . . . . . . . . . . . . . . . . . Balance sheet at xx xxxx 200x . . . . . . . . . . . . . . . . . . . . . . . . . .
189 191
Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income statement for the period ended xx xxxxx 200x . . . . . . .
195 197
Statement of changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of changes in equity for the period ended Xx Xxxx 200X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
199 201
Statement of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of cash flows for the period ended Xxx 200X . . . . . .
205 207
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A bbreviated balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Abbreviated balance sheet at 31 XXXX 200X . . . . . . . . . . . . . .
209 211
A bbreviated income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Abbreviated Income Statement For The Period Ended 31 Xxxx 200X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
215
A bbreviated statement of changes in equity . . . . . . . . . . . . . . . . . Abbreviated statement of changes in equity for the period ended 31 xxxx 200x . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
219
12
217
221
PROLOGUE
The determination of the taxable base in Corporation Tax is no simple task. The starting point for its calculation is provided to us, sic et simpliciter, by the current Article 10 of Law 27/2014, namely: «1. The taxable base shall consist of the amount of income obtained in the tax period reduced by the offsetting of negative taxable bases from previous tax periods. 2. The taxable base shall be determined by the direct assessment method, by the objective assessment method when this Law determines its application, and, subsidiarily, by the indirect assessment method, in accordance with the provisions of Law 58/2003, of 17 December, General Tax Law. 3. In the direct assessment method, the taxable base will be calculated, correcting, through the application of the precepts established in this Law, the accounting result determined in accordance with the rules provided in the Commercial Code, other laws relating to this determination, and the provisions enacted in the development of said rules. 4. In the objective assessment method, the taxable base may be determined totally or partially by applying the signs, indices, or modules to the sectors of activity determined by this Law.» In summary, the common method of determining the taxable base, i.e., the direct assessment —generally used— follows the system introduced by Law 43/1995, established as one of its main innovations, which involves correcting the accounting result with legally typified adjustments for that purpose. Said adjustments, of a positive or negative nature, have increased over the years. Therefore, there is an increasingly lack of correspondence between the result of the entity, determined through commercial legislation, and that taxed by the tax. A consultation of form 200, generally applicable to all taxpayers of Corporation Tax who are obliged to present and submit a declaration for this tax, reveals the existence of more than 90 specific adjustment scenarios. To these adjustments, supported by their corresponding normative reference, is added, 13
in fine, one last adjustment called «other corrections to the result of the profit and loss account», which implies the existence of a higher number of adjustments explicitly determined in the form. Let us remember that the taxpayer must also determine, by themselves, through the self-assessment declaration, the taxable base of Corporation Tax by filling out pages 12, 13, and 14 of model 200, where the referred adjustments are found. Adjustments, at the time, that may imply an increase over the accounting result (for example, for fines, sanctions, and others —art. 15 c) LIS—); a decrease (for example, by the result of the exemption on dividends or profit shares of resident entities —art. 21.1, 21.10, and DT 40th LIS—); or both scenarios of increase and decrease (for example, by differences between accounting and tax depreciation —art. 12.1 LIS—, or by the application of accelerated depreciation in smallsized companies —art. 103 LIS and DT 28th LIS—). This monograph analyses in detail the main adjustments that may be necessary in the process of determining the taxable base of corporation tax. A task that turns out to be of essential to determine the intricate current system that is necessary to achieve that end. Hence the opportunity of the externalisation of the result of the research carried out by Professor Milla Ibáñez. At a time when both the interest of university studies and that of the professionals dedicated to the daily practice of tax law extend beyond our borders, there can be no objection to the welcoming of a work written in Shakespeare’s language, in order to give greater visibility to the knowledge contained therein. For all these reasons, the monograph that the reader now holds in their hands is crucial to understand, or to complement, the essential and required knowledge of the sinuous tax issue that constitutes the core of its object. The author’s meticulous approach and ability to simplify complex concepts make this monograph accessible to both neophytes and experts in the field. The author, Jorge Juan Milla Ibáñez, assistant doctor professor of Financial and Tax Law at the Universitat de València, combines, in this work, with careful care, his well-known research work, inherent to his academic work, with his practical experience in the liquidation of Corporation Tax. The result is a volume of special interest to all those economic agents who are currently facing daily problems resulting from the application of this tax. My congratulations to Dr Milla Ibáñez on this excellent monograph and my best wishes for him to undertake new challenges. Valencia, November 2023 Francisco José Magraner Moreno Professor of Financial and Tax Law Universitat de València