BackThe Central Economic Administrative Court (TEAC) establishes that start-up companies can only benefit from the Corporate Tax rebate at a reduced rate of 15% during the first year of profits and the following year, even if they are in loss in that second year.
This is because the TEAC resolved the case of a company that applied the reduced rate of 15% in 2017, did not apply it in 2018 due to losses, and again applied it in 2019 upon obtaining profits. The Treasury argued that the rebate would be applied in 2018 instead of 2019, since Article 29 of the Corporate Income Tax Law establishes that newly created companies will be taxed at 15% in the first year with a positive taxable base and in the following year. The Administration considered that these two years were consecutive. However, the company appealed to the Central Economic Court of Valencia, which upheld it, considering that the grammatical interpretation of the rule was ambiguous. The expression “the following” could refer both to the period in which the taxable base is positive and to the following tax period. Therefore, the Court concluded that the rule limited the tax benefit to the first two tax periods with a positive taxable base. In its opinion, it would be illogical for an aid intended to encourage the creation of companies through a reduction of the tax burden to deny this benefit.
The State Tax Administration Agency (AEAT) challenged the resolution of the Valencia court before the TEAC, and the latter supports the position of the Treasury. The TEAC argues that Law 11/2013, of July 26, establishes a rate of 15% for the first 300,000 euros of taxable income in the Corporate Income Tax and 20% for the excess, applicable in the first tax period with positive taxable income and in the tax period following this. In addition, the same law, in the field of Personal Income Tax, also establishes a 20% reduction on income for those who start an economic activity, applicable in the first tax period with positive net income and in the tax period following this one.
The TEAC interprets article 29 of the Corporate Income Tax as indicating that newly created entities will be taxed at a rate of 15% in the first tax period with a positive taxable income “and in the following period”. Consequently, it concludes that the reduced tax rate only applies in the first tax period with a positive taxable base and in the following period.
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