The object of study of this article is the equity companies in Spain, specifically the concept and nature as well as its tax. Before entering the object mentioned, it is obligatory to refer to the removal of such companies in 2007, which occurred with the 35/2006, November 28th, the Income Tax for Individuals Law. That is why we consider it appropriate to make a study of what equity companies were before the law 35/2006, of November 28th, and the new tax from 2007.
I. - Concept and nature
The concept of "equity of property" does not exist in civil or commercial matters, but is a purely tax concept. In this way, equity companies are just an ordinary corporation that before 2007 taxed for the special equity companies' regulation, not by the general system of societies. Moreover, it was not a static system but with temporary secondments, which means that a society could pay taxes one year for the general scheme and the following year tax on the special equity companies' regulation .
To fall within the framework of Equity Company, a corporation had to meet certain legal requirements of the Corporations Tax Act. Thus, any society could not be regarded as equity company, only the company more than 90 days of the fiscal year, meet the following requirements:
- That more than 50 % of its assets are comprised of securities, or more than 50 % of its assets are not related to economic activities (to determine whether or not economic activity or property is subject to an economic activity must go to the art. 25 and 27 of the Income Tax Act ) .
- That more than 50% of the capital belongs to 10 or less partners or a family (spouse and relatives up to the 4th grade).
II. - Exclusions
There are some cases in which, although meeting the two requirements mentioned above, were excluded from the tax treatment of equity companies. These cases are the following:
a. When it was a partnership or other entity that does not have the status of taxable corporate income tax.
b. When all partners were legal persons.
c. When the shares of the publicly traded company or other secondary markets.
d. When a public entity holds more than 50 % of its capital.
III . - Taxation of equity companies until 31.12.2006
The equity companies taxed differently from other corporations taxed under the general corporation scheme. A better understanding, we will make a comparison between the general taxation regime IS and the taxation of equity companies.
Under the general corporation tax, company profits are taxed at the flat rate of 35 %, except for a first strip of benefits of SMEs in which the tax rate is 30 %. As for the benefits of society , in the form of dividends , to be distributed among the partners in the case of individual shareholders, the dividends received are taxed certain income tax deductions and partners in the case of legal persons, dividends received are taxed in the general corporate income tax .
The equity companies taxed under the income tax rules, with the peculiarity that society benefits were not taxed as in the case of individuals (45 % tax rate) but at a fixed rate of 40 %.
Moreover, the general rules governing the income tax law so that: certain reductions applied in the general part of the tax base, and profits and losses generated over a year taxed at 15 %.
Dividends on equity society distributed among its members, in the case of members who are natural persons or other property companies, dividends were receiving 100 % free, and in the case of legal person's partners, dividends taxed with a deduction of 50 %.
IV. - Taxation of equity companies as of 1.01.2007
From January 1, 2007, the equity companies have two options: either go to tax in the general corporate income tax without any expertise or advantage, or dissolve and liquidate.