Tax consolidation

In order to benefit from the advantages of the Tax Consolidation Scheme, it is necessary to create a tax group formed by the group of Public Limited Companies, Private Limited Companies and Limited Partnerships resident in Spanish territory and which is formed by a parent company and other subsidiaries.

Article 58 of the Spanish Corporate Income Tax Act establishes that a parent company is a company in which the percentage of ownership of the subsidiary is at least 75%, 70% of which are listed companies. In addition, it must have legal personality, be subject to and not exempt from corporate income tax and hold a majority of the voting rights of the subsidiaries. The requirements to be a subsidiary are simplified to being an entity in which the parent company has the largest shareholding or being permanent establishments of non-resident entities.

A further requirement for the Tax Consolidation Scheme is that it will only be effective when agreed by each and every one of the entities that are to form part of the tax group. The application of this Scheme implies the absence of individual taxation, so that if there is no agreement, each of them will be taxed as an independent taxpayer when making their Corporate Income Tax and VAT settlements.