B Law & Tax
19 May 2023

Tax advisor: Application of tax credits for the consolidation group

The Tax Agency has published a note regarding the application of tax credits by the consolidation group. The content is mainly based on deductions from previous years and tax loss carryforwards.

On the occasion of the introduction of the new tools provided by the AEAT for taxpayers who are under the special tax consolidation regime and must file the corporate income tax return, some of them have raised several questions about the rules governing the application of certain tax credits by the group.

Issues covered in the note

Firstly, it examines the rule established in paragraphs 5 and 7 of section b) of article 74.1 of the Corporate Income Tax Law (LIS), which refers to the distribution of tax losses and deductions within the tax consolidation group in the event of loss of the regime, dissolution of the group or exit of any of the entities that make up the group. Therefore, the note rules that when the taxpayer chooses to offset or deduct a tax credit of the group, the determination of its origin and, therefore, of the remaining balance, is made using a proportional criterion. This means that the proportion in which each of the group entities has contributed to the generation of the credit is considered. In this way, the application of the tax credit generated within the group is carried out proportionally to the contribution of the entities that are part of the group at the time the credit was generated.

Secondly, the purpose of this note is to examine the manner in which the provisions of articles 67.e) and 71.2 of the Corporate Income Tax Law (LIS) should be applied in relation to the use, by the tax consolidation group, of tax losses and deductions generated by any of the entities forming part of the group prior to their inclusion in the group. In summary, the limits established in section e) of article 67 of the Corporate Income Tax Law (LIS) or in section 2 of its article 71, condition the use of tax credits generated prior to tax consolidation to the entity that generated them to contribute a positive taxable income or tax liability to the group. This is done in order to avoid that the existence of these credits could become an obstacle or an incentive for the application of this special regime, thus allowing the credits to be used in an individual taxation regime if they had not been integrated into the group.

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