What are Economic Interest Groupings (EIG)?
The AIEs are entities with legal personality and commercial character, regulated mainly by Law 12/1991, of April 29. Their main objective is to facilitate and develop economic activities of their partners through collaboration.
An EIG should not be confused with an ordinary business company; although both are legal entities, an EIG is specifically designed to improve the efficiency and competitiveness of member companies through cooperation.
These groups may be made up of individuals or legal entities that carry out business, agricultural or artisanal activities.
They can also include non-profit research organizations and professionals in private practice. It is essential that the economic activity undertaken by the AIE be ancillary to the activities of its members.
Some of the specific functions of the EIG may be the following:
- Collaboration in R&D&I projects.
- Co-creation of products and services in sectors such as technology, culture, audiovisual, and the performing arts.
- Access to tax incentives that benefit businesses, such as tax deductions for investment in cultural activities, R&D, and other activities.
Partner Responsibility
One of the most notable characteristics of Economic Interest Groupings (EIGs) is that their members have joint and several personal liability for the group's debts. This means that, in the event of non-compliance with the EIG's tax or commercial obligations, the members must answer with their own assets. This liability is stipulated in Article 5 of Law 12/1991.
Special Tax Regime for AIEs
Regarding tax obligations , Economic Interest Groupings (EIGs) are governed by the general rules of Corporate Income Tax (CIT) , but with certain specificities. Article 43 of the Corporate Income Tax Law establishes a special tax regime that aims to facilitate cooperation between companies without imposing excessive tax burdens on the partners. Below, we detail some of the most important aspects:
- Imputation to resident partners: The AIEs do not pay the tax debt for the part of the taxable base that is attributed to the partners resident in Spain. This means that the AIE will only have to pay taxes for the part corresponding to the partners. nonresidents.
- Operations between the IEA and its partners: Transactions between the IEA and its partners should be treated as related-party transactions, i.e. they should be valued at market prices. However, There is no obligation to retain in the returns due between the IEA and its partners.
- installment payments:AIEs are required to make split payments of IS, although, if all partners are residents, in practice, split payments are not made since the taxable bases are individually attributed to each partner.
Practical Example of Taxation in an EIG
To better understand how this tax regime works, let's consider the following example:
The AIE X has three partners: J (natural person, resident, 40%) , PA (legal entity, resident, 40%) , and NOR (legal entity, non-resident, 20%) . In 20X2, X has a taxable income of 925.000 euros and various tax benefits, such as deductions and allowances.
- Taxation of resident partners: J and PA must impute the tax base, deductions, bonuses and withholdings in proportion to their percentage of participation (40%).
- Taxation of non-resident partners: NOR, being a non-resident, must pay taxes on his or her proportional share of the tax base.
In the event that the AIE has a negative taxable base, resident partners may offset this loss in their tax returns, while non-resident partners may carry forward the losses to future years.
Information and Documentation Obligations
Economic Interest Groupings (EIGs) also have several reporting obligations . Among the most important are:
- List of resident partners: The AIE must submit to the Tax Agency a detailed list of its resident partners, indicating the percentage of imputation of taxable bases and other tax concepts.
- Report to partners: AIEs must inform their partners about the amounts to be allocated and the corresponding items.
- Annual accounts reportIn its annual accounts, the EIG must detail the profits applied to reserves during tax periods and how these affect taxation.
Exclusions from the Special Tax Regime
The special tax regime for AIEs will not apply in certain cases, such as:
- Activities unrelated to its purpose: If the AIE carries out activities other than the auxiliary economic activities of its partners, it must pay corporate income tax as a common entity.
- Participations in other companies: If the EIG has direct or indirect interests in other member companies or controls the activities of its partners, it will lose this special regime.
Recent legal changes
- Law 38/2022 and changes in financing: The law modified aspects of financing for the production of films and live shows. Taxpayers who participate in the financing of these productions can apply deductions under the same conditions as the producer. Financing can be applied at any stage of production, with a limit of 30% of production costs. The financier cannot acquire intellectual property rights over the results.
- Features of the financing contract: The financing contract must detail the identity of the contributors, a description of the production, the budget, and the financing method. The financier is entitled to apply the corresponding deduction, but it cannot exceed 120% of the amount contributed.
- Conditions for the deduction for investment in film and audiovisual productions: The financing contract must be submitted before the end of the tax period in which the financier is entitled to the deduction. The financier cannot claim a deduction greater than the amount of their financing, and any excess must be applied by the producer.
Economic Interest Groupings are a powerful tool to foster cooperation between companies and professionals, providing a more flexible and favorable tax framework. However, their tax regime requires detailed knowledge and rigorous compliance with legal obligations to avoid fiscal or administrative problems. If you are part of an EIG or are considering creating one, it is important to fully understand both its benefits and its responsibilities.
This special tax regime can be a great advantage for small and medium-sized businesses looking to collaborate and improve their competitiveness without the tax burdens of traditional commercial entities.
At Fimax Asesores , we'd be delighted to advise and assist you with the taxation of your Economic Interest Grouping (EIG) . If you have any questions about how to properly manage the taxation of your group, please don't hesitate to contact us . We're here to help you optimize your resources and efficiently meet all your tax obligations!
