Global Tax Alert | 5 December 2013

Spain implements EU CRD IV and provides for monetization of certain deferred tax assets

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Executive summary

Spain's implementation of the European Union (EU) Capital Requirements Directive 2013/36/EU (CRD IV) includes provisions that allow Spanish corporates to monetize certain deferred tax assets (DTAs) by turning them into a refundable tax credit, subject to compliance with certain requirements.

Although these measures are implemented with a special focus on financial institutions, they are applicable to all corporate income taxpayers, regardless of whether they operate in the financial sector or not. Moreover, these rules are also applicable to Spanish permanent establishments of nonresident entities.

Detailed discussion

Royal Decree-Law 14/2013 is applicable to tax years starting as of 1 January 2014.
The legislation implements CRD IV in Spain and also includes rules on the monetization of certain DTAs.

The Royal Decree-Law introduces several amendments to Spain's corporate income tax regulations to ensure that certain DTAs are not to be deemed to rely on the future profitability of the taxpayer. These amendments comply with Article 39 of EU Regulation 575/2013 and are aimed at mitigating the impact of the deduction of DTAs from the core capital of financial entities pursuant to the Basel III framework.

Under the new legislation, “temporary difference” DTAs which derive from (i) the impairment of assets or receivables resulting from the insolvency of unrelated debtors;
or (ii) certain pension contributions, will be replaced by a tax credit under certain circumstances. In particular, when (i) the taxpayer reports a loss in its audited financial statements; or (ii) the taxpayer is liquidated or becomes insolvent.

DTAs resulting from carried forward tax losses should also benefit from the new rules where the tax losses result from the reversal of the above temporary difference DTAs after 1 January 2014. Additionally, DTAs derived from tax losses generated after 1 January 2011 as a result of the reversal of the above temporary difference DTAs are automatically re-characterized as DTAs eligible for a tax credit.

The conversion of DTAs into a tax credit will occur when the corporate income tax return corresponding to the tax year during which the triggering event has taken place is filed (i.e., shortly after six months from year end). The taxpayer can choose either to request a refund of the tax credit or to use it against any other tax liability generated after the conversion has taken place. Furthermore, relevant DTAs eligible for conversion (i.e., the tax losses from the materialization of DTAs) may be exchanged for Spanish Public Debt after 18 years (or if recognized before Royal Decree-Law 14/2013 enters into force, 18 years after that date).

The procedures regarding the refund or use of the tax credits provided for in Royal Decree-Law 14/2013 as well as the procedure for exchanging the DTAs for Spanish Public Debt will be set out separately in the near future.


Spanish corporate taxpayers should review whether they fall under the scope of these new measures and will therefore be able to benefit from the advantages available as of 1 January 2014.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Abogados, Madrid
  • Adolfo Zunzunegui
    +34 915 727 889
  • Elizabeth Malagelada
    +34 933 663 894
  • Laura Ezquerra
    +34 915 727 570
Ernst & Young LLP, Spanish Tax Desk, New York
  • Cristina de la Haba
    +1 212 773 8692

EYG no. CM4019