Main Changes in Corporate Tax Law

10 January 2011

Corporate tax (hereinafter, “CT”)

The following modifications will apply as of January 1, 2011.

On the one hand, the minimum net business turnover to qualify as a small-sized company (known by the Spanish acronym “ERD”) has been raised. The previous net business turnover amount to qualify for the benefits established for these types of entities was increased from 8 to 10 million euros.

In addition, the taxable base limit in order to apply the reduced tax rate of 25% to these entities was increased from 120,202.41 euros to 300,000 euros. Amounts that exceed the first 300,000 euros will be taxed at a 30% rate.

Likewise, entities whose net business turnover from the preceding fiscal year does not exceed 5 million euros and who have 25 employees or less on staff (as long as the average staff size, based on the 2008 fiscal year, is maintained), will pay the 20% tax rate for the first 300,000 euros of taxable base, and remainder at a 25% tax rate.

It has also been established that as long as the entity complies with the established requirements in order to apply the tax benefits for ERD during the three taxable periods prior to reaching the amount of 10 million euros, these benefits could apply during the three taxable periods immediately following the one in which said amount is obtained.

For further information, please contact Isabell S. Bachiller: