Last Friday, Royal Decree-Law 2/2016, of September 30, which included measures to reduce the public deficit ("RDL 2/2016"), was approved.

Following the approval of the new regulation, installment payments on account toward the Corporate Income Tax will be calculated as follows:

  1. Taxpayers with a turnover during the 12 months prior to the beginning of the tax period for which they are making the payment on account, of at least 6 million euros, will continue to calculate their payment on account on the basis of the total tax payment for the last tax period ended on the first day of the period for making the installment payment in question. The applicable rate remains 18%.
  2. Taxpayers with a turnover during the 12 months prior to the tax period in question greater than 6 million but less than 10 million euros will calculate the installment payment on the taxable base, calculated from the beginning of the tax period at the close of the tax period for which the installment payment is made (three, nine, or eleven months). The applicable rate in this case remains 17% for companies that pay at the general tax rate of 25% (for credit institutions and the hydrocarbons sector, the rate is 21%), with no change with respect to the current tax rates on the installment payment made in April 2016.
  3. Taxpayers with a turnover during the 12 months prior to the tax period in question greater than 10 million euros, will likewise calculate the installment payment on the taxable base which results from the beginning of the tax period to the close of the a tax period ending on the three, nine, or eleven months. The applicable rate has increased to 24% for taxpayers subject to the general tax rate (for credit institutions and the hydrocarbons sector, the rate is 29%).

In addition, for this last type of taxpayers, the minimum payment on account cannot be less than 23% (25% for credit institutions and the hydrocarbons sector) of the positive profit and loss account results (that is, the net accounting book result) for the relevant tax period.

In accordance with this system, the taxpayer will then pay the greatest of (i) the installment payment on the taxable base, applying the 24% rate – deducting withholdings and previous installment payments or, (ii) the 23% of the book result for the same period but only deducting the installment payments.

The regulations introduced by RDL 2/2016 come into effect on the day of their publication. They are therefore applicable immediately for the installment payment to be made on October 20, 2016.

Order HAP/1552/2016, of September 30, which approved the new models for declaring installment payments, was published on the same date as RDL 2/2016, September 30, 2016.