The carry forward period for tax loss in Spanish Corporate Income Tax has been extended indefinitely. But did you know if a company experiences a substantial change in his controlling interest and some circumstances exist, then the right to offset previous losses may be completely disallowed?
The Spanish CIT law prevents the transfer of tax loss on the event of a change of ownership when (the three requirements should be met at the same time):
- The majority of the capital stock has been acquired after the end of the tax period when the tax losses arose.
- Before the transfer, the new shareholder held less than 25 percent at the end of the tax period when the tax losses arose.
- The acquired entity:
- Has not developed any economic activity in the 3 months prior to the acquisition, or
- Has developed a different or additional economic activity during the 2 years after the acquisition which generates a net turnover over the 50% of the net turnover in the 2 prior years, or
- It is a ‘passive holding company ’not engaged in any active trading, or
- It has been removed from the Spanish tax census for not filing its CIT returns during three consecutive tax periods.