The recognition of tax credits arising from tax losses carried forward is a key aspect of corporate tax management, as it directly influences the financial and tax position of an entity. In this context, the correct application of the tax rate in these cases is essential to faithfully reflect their impact on the financial statements.
This article analyzes the tax rate applicable to the recognition of a tax credit for tax losses in a company whose net turnover (INCN) in 2022 did not exceed €1 million and which, in 2023, has incurred losses.
Applicable accounting standards
Recording and Measurement Standard (NRV) 13 of the Spanish National Chart of Accounts established that deferred tax assets, such as tax credits for tax losses, should be recognized when it is probable that the company will generate future taxable profits that allow them to be offset.
The Resolution of February 9, 2016 of the Spanish Accounting and Auditing Institute (ICAC) extended this criterion, stating that the recovery of these assets is not considered probable if their use is expected in a period of more than ten years or if the company has a history of continuous losses, unless there is evidence to the contrary.
Applicable tax rate
Law 27/2014, on corporate income tax, as amended by Law 31/2022, establishes a general rate of 25% and a reduced rate of 23% for entities whose INCN in the previous tax period is less than €1 million. This reduced rate is not applicable to asset-holding entities, according to article 5.2 of the same law.
Valuation of the tax credit at the accounting close
At year-end, the company must value the deferred tax asset according to the expected tax rate at the time of its reversal:
- If it is anticipated that the INCN will remain below €1 million, the reduced rate of 23% needs to be applied
- If it is anticipated that it will exceed this threshold, the general rate of 25% needs to be applied.
It is essential to periodically review these estimates and adjust the valuation of the tax credit according to changes in the company’s economic situation.
