Tax consolidation vs VAT group in Spain

Spanish tax consolidation and the VAT group sound similar, but they solve different problems: one pools taxable profits and losses, the other pools VAT positions. The wrong choice affects cash flow and flexibility for years.

Corporate income tax consolidation

The special regime in Chapter VII of the Corporate Income Tax Act requires at least 75% direct or indirect ownership, or 70% for listed companies, plus a resolution from each entity. The group is taxed on combined bases with eliminations, at the standard 25% rate. The election is filed on Form 036 on time and binds the group for 3 years, renewable. It allows one subsidiary’s 80,000 euro loss to offset another company’s profit in the same year.

VAT group scheme

The VAT group under Articles 163 quinquies onwards of the Spanish VAT Act also requires control and formal agreement, but it does not merge profit: it nets VAT payable and recoverable and allows the advanced level with special pro-rata or cash pooling. Each member still files Form 303, while the group files Forms 322 and 353. The election is made in December for the following year and also locks in for a minimum of 3 years.

Simple numeric example

Parent A earns 200,000 euros and subsidiary B loses 80,000 euros. Without consolidation, A pays 50,000 euros and B carries its loss forward. With consolidation, the base is 120,000 euros and the tax is 30,000 euros, a 20,000 euro cash saving that year. For VAT, if A charges 40,000 euros and B incurs 25,000 euros of deductible input VAT, the group can net the payment and reduce the risk of monthly refund claims entity by entity.

Which scheme fits your group

With uneven results and a stable outlook, income tax consolidation often pays off. With VAT timing gaps between operating companies, the VAT group helps liquidity. Both need consistent census and accounting records, so review them with tax support before the December deadline.

If you are unsure which regime fits, request your first consultation with no obligation. We compare your group figures and suggest the lower-risk option for the next three years.