Tax incentive for capitalization of companies

In the context of approving their 2023 accounts by the legal deadline of March 31, companies should consider a tax benefit known as the tax incentive for the capitalization of companies (“ICC”) when allocating their financial year earnings.

This tax incentive involves a deduction from the corporate income tax taxable profit, and it can lead to significant tax savings for companies that choose not to distribute dividends to their shareholders.

Significant amendments were made to the ICC in the State Budget for 2024. For more information, please refer to point 4.2 of our Guide to the State Budget Law Proposal for 2024.

These amendments have accelerated and maximized the use of this tax incentive in the short term as follows:

• The fixed limit of the tax incentive has been raised to €4 million.
• There has been a change in how the deduction is calculated. Instead of a deduction equivalent to applying a fixed rate of 4.5% on net increases in eligible equity, the government has established a deduction equivalent to applying the 12-month average Euribor rate for the tax period, calculated on the last day of each month, added to a spread of 1.5 p.p. (or 2 p.p. in the case of small and medium-sized enterprises or small midcaps), applied to the amount of net increases in eligible equity.
• The application period has changed to the financial year and the previous six financial years, compared to the nine years previously provided for.
• The tax incentive will be increased by 50%, 30% and 20% in tax years 2024, 2025 and 2026, respectively.

Based on the above, companies should analyze this tax incentive and approve their accounts in line with its potential application by March 31