One in four large Spanish companies pays less than 2% of their profits in worldwide tax

One of the big four Spanish multinationals (included in 31 groups) – with an annual turnover of more than 750 million euros – stated that in 2020 they paid on average only 1.75% of their global profits through corporate tax.

This is clear from the fifth edition of the analysis he prepared Tax agency based on the information provided by the companies through the information declaration form 231 country by country (CBC).

The document reveals that in 2020 they were in Spain 126 multinational companies with a turnover of more than 750 million euros worldwide. The corporate tax paid by these companies as a whole falls less than profits, so the global effective rate of these Spanish multinationals rose to 24.8% (up from 16.7% in 2019, to 18.3% in 2018 and 17% in 2017).

Together, these groups paid income tax globally 12,502 million euros16.5% less than in 2019. That represents 24.7% of your profit (50,471 million euros, 43.7% less than in 2019).

Of this total of 12,502 million paid amounts, what was paid by 31 multinational groups with a global effective rate of less than 5% reached only 88 million euros, or 0.7% of the total amount registered by all these companies.

global billing

The study, which was published on the website of the Tax Administration, provides information on the largest Spanish parent groups and their 14,854 branches, of which 9,948 (67%) were foreigners. Specifically, 50% of the subsidiaries of the Spanish parent company are located outside the European Union (EU), 33% in Spain, and the remaining 17% in other EU countries.

These multinationals together added, according to the information they published, world traffic of 759,300 million euros in 202018.7% less than the previous year.

Impact of pandemic losses

The tax administration points out that the economic crisis caused by the pandemic is reflected in the decline in sales, accounting results before taxation, material assets, capital and the number of workers of large Spanish multinational groups.

As he explains, the existence of such high effective rates (and their sudden growth of 8 points in 2020, up to 24.77%) is caused by the fact that in these statistics the result is declared as a balance between profits and losses according to jurisdiction.

Existence of large losses due to the pandemic has significantly distorted the effective rates upwards when calculated on net results. In other words, the effective rates of the statistics are always overestimated, but the bias is even greater the higher the recorded losses, without the possibility of purifying this information return distortion due to the absence of a breakdown between gross profits and losses by jurisdiction.

Spanish subsidiaries, less profitable

According to the report, the profitability of the group (the result before tax on the operating figure) is 0.6%. The figure contrasts with those of the rest of the world in terms of profitability and productivity: the nationals are less profitable than the average with negative profitability (-1.5%), have a pre-tax result with losses, but at the same time they are very productive (they sell more per employee)from which it could be concluded that matrices support a greater distribution of costs.

On the contrary, branches both in the rest of the EU and outside the EU are more profitable. Branches outside the EU are less productive, while those in the EU are more productive because they generally have a lower average workforce.

By jurisdiction, as in 2019 and 2020 the highest productivity per employee is concentrated in Malta, Luxembourg, the Netherlands and Irelandin all of them more than 3 times the average productivity.

what is the report Country by country?

He Country by country (CBC) is an informative declaration model that must be submitted, in their tax residency, by parent companies of multinational companies with a net consolidated worldwide turnover of more than 750 million euros.

The information, which must affect all entities that are part of the tax group, is presented in Spain through the application form 231, and the presentation corresponds to multinational companies with Spanish parent companies.

The goal of the CBC is to collect aggregated and anonymous data from this group of large multinational companies for information exchange, in order to provide countries with a global perspective of activities within the group of their largest multinational companies.

The tax agency publishes statistics based on data reported in the Income Tax in Spain, where the effective rates at which companies and groups are taxed in our country are offered, calculating these rates both on the taxable tax base and on the reported results. accounting, including in the latter income generated abroad and likely to have been taxed in other countries.

Therefore, in the case of globalized companies, the information presented was not complete because there was still no information about their taxation in other countries. This CBC analysis complements the information as calculated taxes and those deemed paid by major Spanish groups worldwide are published.

In any case, the information related to the CBC is not comparable to that which exists in the statistics published by the AEAT on taxation in Spain, since there are major methodological differences.