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25 January 20243 minute read

Spanish Constitutional Court overturns Corporate Income Tax measures for large taxpayers

On 18 January 2024 the Spanish Constitutional Court has ruled that the Corporate Income Tax (CIT) measures established for large taxpayers approved by Royal Decree-Law 3/2016 of 2 December 2016 (Royal Decree 3/2016), is unconstitutional and therefore null and void, because it violates the limits of the power to legislate through Royal Decree.



The Plenary of the Constitutional Court upheld the question of unconstitutionality raised by the Contentious-Administrative Chamber of the Spanish National Court on the Corporate Income Tax measures for large taxpayers approved by Royal Decree 3/2016.

Although the judgment has not been published in the Official Gazette yet, the Court has published a note ahead of the judgement. In this note it analyses the violation of Article 86.1 of the Spanish Constitution which prohibits Royal Decree-Law to regulate matters affecting certain rights, duties and freedoms of citizens, concerning among others the “duty to contribute to the support of public expenditure” of Article 31.1 of the Spanish Constitution.

To justify the application of the constitutional doctrine on the limits of the Royal-Decree Law in the area of taxation, the Constitutional Court reasons as follows: the “duty to contribute” is by the legislation in question affected, due to the nature of the tax concerned, being namely one of the most relevant taxes in the Spanish tax system and due to the importance of the modification introduced by the relevant legislation.

However, the Constitutional Court has limited the effects of this judgement by establishing that any CIT return that had not been challenged before the date of the judgment cannot be revisited.


Key Features

The tax measures approved by Royal Decree 3/2016 were aimed at increasing the tax revenues and reducing public deficit. Pursuant to the note published by the Court, the CIT measures annulled by the Constitutional Court are summarised below, all of which were effective as of fiscal years starting after 1 January 2016.

1. Limits to carry forward tax losses

As a general rule, the offsetting of net operating losses (NOLs) is limited to 70% of the taxable base, with a minimum amount of EUR1 million. Royal Decree 3/2016 reduced the previous limit to 60% of the taxable base and, for large taxpayers with net revenues equal to or above EUR20 million in the previous 12 months, to:

  • 50% of the taxable base for entities with net revenues equal to or above EUR20 million and below EUR60 million.
  • 25% of the taxable base for entities with net revenues equal to or above EUR60 million.

2. Limits to domestic and international double taxation credit

Royal Decree 3/2016 established for large taxpayers an aggregate limit of 50% of the gross tax payable of the tax year for the use of domestic and international double taxation credits.

3. Reversal of impairment losses of subsidiaries deducted before 2013

Until 2013, impairment losses on subsidiaries were deductible for CIT purposes. Royal Decree 3/2016 established a minimum 20% (ie five years) reversal of the total amount deducted up to 2013.



Those taxpayers who had not challenged their previous CIT returns would not be entitled to claim any refund from the Tax Authorities.

Until the Spanish Government passes a new Law, presumably to include the measures of Royal Decree 3/2016 following the appropriate regulatory proceeding, the above-mentioned rules would not be applicable. Therefore it is advisable that large taxpayers analyse the impact of this judgement will be for their next CIT return filings.