On 25 May 2023, Spain published Law 13/2023 in the Official Gazette, which introduces new interest deduction limitation rules in line with the EU Anti-Tax Avoidance Directive (ATAD).
Spain’s current rules limiting interest deduction were deemed to be as effective as those in ATAD, generally 30% of EBITDA. The new rules, effective from 1 January 2024, stipulate that the deduction of net interest expense is capped at 30% of the year’s EBITDA, with disregarded income, expenses or rent being specifically excluded in the tax base.
In any case, net financial expenses totaling EUR 1 million from the tax period will be eligible for deduction. If there are limitations on deducting net financial expenses, any unclaimed amount can be carried forward to subsequent tax periods and deducted alongside the net financial expenses for that specific period, adhering to the same limitation. If the net financial expenses incurred in a tax period do not reach the limit, the remaining amount can be carried forward for a maximum of five years. This effectively extends the limitation, allowing the deduction of the remaining difference in subsequent years until it is fully utilized. Credit institutions and insurance companies are exempted from the rules governing the limitation on interest deduction.
