IAE Exemption: Changes in the Determination of Turnover to Apply the Exemption

The regulation of IAE tax exemption for corporate taxpayers whIch have a net amount of turnover (hereinafter, “INCN“) of less than 1,000,000.00 Euros has been modified by the approval of Act 11/2021, of July 9, on measures against tax fraud.

Article 82 of Royal Legislative Decree 2/2004, on Local Administration, is modified, so that it is added, regarding the determination of the INCN in those cases in which the entity is part of a group of companies due to the concurrence of any of the circumstances of the Article 42 of the Commercial Code, which will take into account the INCN of the said group “regardless of the obligation of accounting consolidation”.

Although the previous regulations already provided that in the case of entities that are part of a group of companies, the INCN of the group had to be considered, there were judicial decisions of the Spanish Supreme Court that reduced its application it: among others, in de judicial decision STS 3043/2018, the Court established that “the referral contained in article 82 (…) of the Local Tax Law to groups of companies (…) must be interpreted in such a way that only those groups of entities when they act as consolidated groups are understood as such, that is, when they must, by legal obligation, formulate their annual accounts under a consolidation regime ”.

The recent amendment introduced by the Law against tax fraud aims to clarify that, when there is a group of companies, the INCN of the group will have to be considered, regardless of whether this group is in a consolidation regime or not. In this way, the interpretation of the Supreme Court to the previous regulations is no longer valid from now on.

The declaration of registration of IAE -form 840- for ceasing to enjoy the exemption must be made during December immediately before the year in which they are obliged to pay.

Consequently, during December 2021, for those companies that are part of a group of companies, a declaration of registration of IAE must be submitted for ceasing to enjoy the exemption if at the end of the year 2020 the INCN of the group was higher to 1 million Euros.

This will imply that many companies whose INCN was less than this amount and were exempt from the tax will have to register and pay taxes by the IAE as of next year if they exceed said amount together with the other entities of the group.


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