The Directorate General for Taxes (DGT) has concluded that the accelerated amortization system may be used in the regime for companies of a reduced size, though only for goodwill and for intangibles with useful lives that cannot be reliably estimated.
The special regime for companies of a reduced size allows a number of tax incentives. Among others, article 103.5 of the Corporate Income Tax Law (LIS) states that the intangible assets referred to in article 13.3 of the law (acquired when the requirements for claiming that special regime are satisfied) may be amortized at 150 percent of the amount determined according to that article.
That article 13.3 is no longer valid, however, following the amendments introduced in the Corporate Income Tax Law (LIS) by Law 22/2015 of July 20, 2015 which gave new accounting treatment to intangible assets. Before Law 22/2015 was in force, the accounting and tax treatment for intangible assets was as follows:
- Intangible assets with definite useful lives were amortized for accounting purpose over their useful lives. From a tax standpoint, any amortization expense so recorded was tax deductible (article 12.2 LIS).
- Intangible assets with indefinite useful lives (including goodwill) were not amortized for accounting purposes. According to the then current wording of article 13.3 of the LIS, however, 5% of their cost could be deducted each year without having to be recognized for accounting purposes.
Following Law 22/2015 all intangible assets are considered to have useful lives, although in some cases they cannot be reliably estimated. Following this amendment, the Corporate Income Tax Law (article 12.2) states that intangible assets are amortized over their useful lives; and if their useful lives cannot be reliably estimated, their amortization expense for accounting purposes is deductible up to an annual limit of 5% of their cost. Goodwill is also allowed to be amortized within this same limit.
In other words, the amortization system for intangible assets is now contained in article 12.2, whereas before Law 22/2005 the system in article 12.2 had to be used for intangible assets with definite useful lives and the one in article 13.3 for intangible assets with indefinite useful lives, including goodwill. Now that article 12 is used for both systems the provision in article 103.5 relating to accelerated amortization in the regime for companies of a reduced size has become invalid.
In view of this change to the law, the DGT (in resolution V3057-19 of October 30, 2019) concluded that accelerated amortization may be used in the regime for companies of a reduced size, though only for goodwill and for intangible assets where their useful lives cannot be reliably estimated.
This interpretation surprisingly means that a more unfavorable system has been kept for intangible assets where their useful lives can be reliably estimated compared with other intangible assets, for which the regime for companies of a reduced size also allows accelerated amortization (in article 103.1 LIS).