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2010 Tax reform – entered into force: income tax – companies — Orbitax Tax News & Alerts

Law 8/2010 of 12 March 2010, published in the Official Gazette on 15 March 2010, introduced amendments to the Fiscal Code modifying various taxes and creating a new Tax Court of Appeals. Generally, the amendments will have effect from 1 July 2010; except for Arts. 9 and 10 of the Law regarding corporate and individual income tax rates, which have a retroactive effect as of 1 January 2010 and other specific amendments as explained below. The main amendments introduced regarding income tax (companies) are described below.

(a) Corporate income tax rates.

With effect from 1 January 2010, the corporate income tax rates are as follows:

(i) The general income tax rate levied on companies is:


Year

Rate (%)

in 2010

27.5

in 2011 and onwards

25

(ii) In case of companies, whose main activity is the generation and distribution of electricity, telecommunication services, insurance and reinsurance, cement production, gambling, mining and banking, and financial entities regulated by Law 42 of 2001, the corporate income tax rate is:


Year

Rate (%)

2010-2011

30

2012-2013

27.5

2014 and onwards

25

Subsidiaries or affiliates of these companies providing services related to the activities mentioned above are subject to the same corporate income tax rate.

(iii) State-owned companies, i.e. companies where the State has a participation of least 40%, are subject to income tax at the rate of 30%.
(iv) Call centers are subject to the general corporate income tax rate in respect of local operations.

(b) The alternative calculation of taxable income (cálculo alterno del impuesto sobre la renta - CAIR) is available only to companies whose taxable income exceeds PAB 1.5 million per year. These companies may choose to be subject to (general or the specific) corporate income tax rate on the greater of:

-   the net taxable income calculated as provided by the Fiscal Code; or
-   4.67% of the total taxable income.

 (c) Advance payments (adelanto mensual impuesto sobre la renta – AMIR).

With effect from 1 January 2011, companies must pay a monthly advance "estimative" income tax equal to 1% of total taxable income of the relevant month. The following specific rules will apply:

-   taxpayers importing, distributing and selling gasoline, liquefied petroleum gas (LPG), diesel and jet fuel may deduct from the total taxable income the "petroleum consumption tax" (Impuesto al Consumo de Combustibles y Derivados del Petróleo) and the acquisition cost of those products;
-   fuel transport companies will be subject to 1% of the gross profit margin;
-   insurance and reinsurance companies may deduct from the total taxable income the premiums on insurance and reinsurance transferred to other companies engaged in the same activity;
-   civil societies may deduct from the total taxable income the amount distributed to their members; and
-   companies importing and manufacturing foodstuff, pharmaceutical products and medicines for human consumption may deduct from the total taxable income the VAT (Impuesto a la Transferencia de Bienes Corporales Muebles y la Prestación de Servicios - ITBMS) paid or incurred only on the acquisition of packing materials for the manufacture of these products.