The special tax regime for small-sized entities (ERD), regulated under Articles 101 to 105 of Law 27/2014 on Corporate Income Tax (CIT), comprises a set of measures aimed at enhancing the competitiveness and efficiency of small and medium-sized enterprises through specific tax incentives. However, its application raises particular issues in the case of newly incorporated entities that, from their inception, are part of a corporate group. In this context, it is essential to examine both the applicable legislation and the current administrative interpretation in order to determine whether these entities may legitimately benefit from the special regime.
From a legal standpoint, Article 101.1 of the CIT Law provides that entities whose net turnover (INCN) in the immediately preceding tax period is below 10 million euros may apply the ERD regime. However, for newly created entities, this reference to the previous year is not applicable. In such cases, the Directorate-General for Taxation (DGT) has consistently interpreted that the net turnover of the initial tax year itself must be taken into account.
The regulatory complexity increases when the newly created entity is part of a corporate group from its inception. According to Article 101.2 of the CIT Law, if an entity belongs to a group of companies for the purposes of Article 42 of the Spanish Commercial Code—regardless of tax residency or the requirement to prepare consolidated financial statements—the 10 million euro threshold must be calculated on an aggregate basis across all group entities. This interpretation has been confirmed by the DGT in numerous binding rulings, including Ruling V3546-20, and more recently reaffirmed in decisions such as RF 17/25 (April 2025).
Therefore, if the group’s combined net turnover exceeds the 10 million euro threshold, the newly created entity will be excluded from the ERD regime, even if its individual turnover falls below the established limit.
Illustrative Example
A limited liability company is incorporated in January 2025, generating a turnover of €250,000 that same year. However, from its incorporation, it forms part of a corporate group whose combined net turnover amounts to €11.3 million. In this case, the company will not be eligible to apply the ERD regime, as the group exceeds the threshold set forth in the CIT Law.
Jacqueline Hincapié
