Know what is the Capitalization reserve and the Leveling reserve It can mean an important advantage for your company. These two tax figures allow to reduce the tax base of the Corporation Tax if certain requirements are met, which translates into fiscal savings that can reinforce the financial health of your business.
What is the capitalization reserve?
The capitalization reserve seeks to encourage Business autofinance. Instead of distributing benefits via dividends, companies that choose to increase their own funds can apply a 10% reduction in the tax base of companiesprovided that the criteria of article 25 of Law 27/2014 comply with.
To be able to take advantage of this measure, it is necessary:
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Maintain the increase in own funds for at least five years, except in case of losses.
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Provide a specific reserve that must appear in the balance with unavailable and perfectly identified character.
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Reflect the accounting endowment, although adjustment is not required in the tax base beyond fiscal calculation.
How is it calculated?
Suppose your company increases its own funds by 10,000 euros compared to the previous year. Applying the 10% reduction, you can deduce 1,000 euros of your tax base, always respecting the 10% limit on it.
Accounting
To register this reserve, the specific accounting account is usually used (1146) Capitalization Reservewhich allows you to identify it clearly.
What is the leveling reserve?
Designed for reduced dimension companies, leveling reserve allows you to reduce taxation anticipating possible future losses. This tool allows you to apply a minority of up to 10% of the tax basecompensating losses that can be generated in the following five exercises.
If losses are not generated, that non -taxed part must be included in the calculation of the benefits of the fifth exercise, acting as a fiscal deferral.
How is it calculated?
Let’s look at an example:
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In the first year the company obtains an taxable base of € 100,000 and applies a € 10,000 leveling reserve.
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In the following two exercises it generates losses of € -5,000 and -1.500 €, which are compensated with the reservation.
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In the fourth year, the tax base will be € 6,000, to which the remaining € 3,500 of the original reserve will have to be added, totaling an € 9,500 tax base.
Accounting
The reservation is recorded by account (1147) Leveling Reservekeeping it separated from the rest of accounting reserves.
Conclusion
Both the capitalization and leveling reserve are tax mechanisms that offer important benefits to companies that plan their growth and tax. Applying them correctly requires complying with certain technical and accounting requirements, so having professional advice is key.
Are you interested in applying these fiscal tools in your company? Check with your accounting or fiscal advisor and make sure you are taking advantage of the entire legal margin available to reduce your tax invoice.