Half of Spanish multinationals pay taxes below the global minimum rate.
The 123 groups of companies covered by the new international minimum rate of 15% pay out an average of 14.4% of their profits. The 57 countries that pay the lower effective rate may have to pay an additional $4 billion.
The new global minimum corporate tax rate of 15%, which the government is working to begin implementing this year in Spain, will affect a total of 123 multinationals in the country with annual turnover exceeding 750 million euros.bison. Of those, nearly half are paying an effective rate below that set by the new floor, according to data released yesterday by the Tax Agency, which threatens to ultimately increase their tax bills by about $4 billion.
This builds on the publication yesterday of the annual country report corresponding to the 2021 financial year, in which the Tax Agency uses the global 231 tax return model to comply with the BEPS initiative (the English acronym for the Action Plan against Tax Base Erosion and Profit Shifting). The document identifies the same population of companies that are subject to the new minimum international corporate rate promoted by the Organization for Economic Co-operation and Development (OECD), and finds that 123 Spanish groups with a turnover of more than 750 million people (3 less than in 2020) ) are taxed at an average effective rate of 14.4% on their profits.
This figure contrasts with Spain’s nominal starting corporate tax rate of 25% (30% for banks and oil companies), and is also lower than the effective rates recorded in previous years: 24.8% in 2020; 16.7% in 2019; 18.3% in 2018 or 17.0% in 2017.
The groups covered by the new minimum rate have 13,699 subsidiaries (4,333 with tax residence in Spain, 9,366 abroad), a global turnover of 902,724 million (18.9% more than in the previous year and already in line with 2019), total profits of 98,342 million (up 94.8% from 2020), and the global corporate tax bill of 14,168 million (up 13.3% from 2020).
“The country-by-country 2021 report shows economic recovery from the pandemic crisis as, with fewer multinationals with a Spanish parent, sales volumes, pre-tax accounting results, taxes paid and accrued, and tangible assets perform above 2020 levels and close to the figures for 2019,” the Tax Service calculated. The organization warns that “country-specific effective rates are always overestimated, but the bias is larger the larger the reported losses, as happened in 2020 due to the pandemic, and the distortion inherent in the declaration cannot be cleaned up.” . informative due to the lack of a breakdown of gross profits and losses by jurisdiction.”
From this starting point, the focus is on the 57 multinational corporations (of which 8,163 are subsidiaries) that pay taxes at an effective rate below 15%, representing 46% of the total. The group made a profit of 62.729 million in 2021 and contributed 5.066 million in corporate tax, meaning they are approximately 4.300 million short of reaching the required 15%. In any case, this is a rough estimate, given that the global effective rate is not applied to total profits, but rather allows items such as interest, dividends and negative tax basis for prior losses to be reduced from the amount ultimately taxed.
Those that pay the least
On the one hand, there are 26 companies that pay taxes at an effective rate of less than 5% (with an average rate of 2.9%). The group made 21,120 million before tax in 2021 (compared to the 2,502 million lost in 2020), concentrating 25.9% of the Spanish group’s global profits at the minimum rate, “paying only 5.2% in corporation tax” subscriber , points from the treasury.
In addition, there are 16 other firms that pay an effective rate of between 5% and 10% (average 7.52%); and another 15 that pay between 10% and 15% (average 13.7%).
Spain had until the end of 2023 to bring forward a European directive governing a new global minimum rate, although legislative paralysis caused by the progress of the general election has delayed its implementation, which is currently being reviewed by the Treasury.
In parallel, Spain already applies a minimum rate of 15% for companies, which affects 450 corporate groups and 90 companies invoicing more than 20 million per year, which has already cost them 580 million.
Less profitable but more productive subsidiaries
As well as revealing the weight of the profit tax bills of large Spanish multinationals, the Tax Agency’s report provides other clues to the performance of these groups. “Spanish subsidiaries are less profitable than average, with a profit margin this year of 7.5% compared to 9.3% globally, but at the same time they are very productive (they sell more per employee), from which it can be concluded that parent companies bear greater cost sharing,” the document says. “The same is true for subsidiaries in the rest of the EU. In contrast, non-EU subsidiaries are more profitable (13.7%) and less productive,” he adds. The report highlights that the average workforce size in both EU and non-EU subsidiaries is lower than the global average, and Spain “has the highest (268 employees per subsidiary).” The highest productivity per employee is concentrated in Malta, Luxembourg, the Netherlands and Ireland, all of which are more than average. three times. Finally, the document states that Spanish multinationals declare in Spain 55.6% of their global turnover, 48.2% of total assets, 43.6% of profits and 38.7% of the taxes they pay, with a slight reduction. in 2021, the gap between the place of receipt of income and taxes compared to 2020.