Tuesday, February 24, 2009

New Law Alert: Corporate Taxation

It has been reported that the government will issue a new corporate tax law in the next month. The new law is expected to amend the existing tax law, as provided in Royal Decree 47/81.

The new law is expected to clarify existing tax issues and issue new rules on areas of taxation not covered by the existing law. For example, the new law is expected to set forth rules for thinly capitalized companies (a company is said to be thinly capitalized when its capital includes a greater proportion of debt than equity). In addition, the new law will broaden the applicability of withholding tax rules, which relate to amounts withheld by companies from payees in order to pay tax authorities. Lastly, the new rules will include a clarification of transfer pricing rules, or the rules that govern the prices companies charge for assets transferred between separate divisions/subsidiaries of the same company.