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Practical manual for Income Tax 2020.

7. Financial expenses

Delimitation of deductible or non-deductible financial expenses:

This includes all expenses arising from the use of external financial resources to finance the company's activities or its assets. Among others, the following are considered as such:

  • Expenses for discounting effects and financing of the company's operating credits.
  • Surcharges for deferral of payment of debts corresponding to the activity.
  • Interest corresponding to deferrals and fractioning of tax debts, provided that they are directly related to the activity and correspond to the fiscal year.

On the contrary, are not considered deductible financial expenses :

  • Those that entail a higher cost of acquiring heritage items.
  • Those arising from the use of own capital.

Limitation on the deductibility of net financial expenses

The limit on the deductibility of net financial expenses will be the greatest of the following amounts:

  1. 30 percent of the operating profit for the year. 
  2. 1 million euros when the previous limit exceeds one million euros

Up to this amount, that is, up to 1 million euros, net financial expenses will, in any case, be deductible.

However, when the duration of the activity is less than a year, the deductible amount will in any case be the result of multiplying one million euros by the proportion between the duration of the activity in the tax period and the year.

See the Resolution of July 16, 2012, of the General Directorate of Taxes, in relation to the limitation on the deductibility of financial expenses in the Corporate Tax ( BOE of 17).