- 1Spain: An attractive country for investment
- 2Setting up a business in Spain
- 3 Tax System
- 4 Investment aid and incentives in Spain
- 5 Labor and social security regulations
- 6 Intellectual property law
- 7Legal framework and tax implications of e-commerce in Spain
- AI Annex I Company and Commercial Law
- AIIAnnex II The Spanish financial system
- AIIIAnnex IIIAccounting and audit issues
- Legal framework
- Accounting records
- Financial statements
- Conceptual accounting framework and recognition and measurement bases
- Distributable profit
- Requirements concerning disclosures in the notes to the financial statement
- Auditing requirements
- Financial statement publication requirements
- Appendix I - Model balance sheets
- Appendix II - Model income statements
- Appendix III - Model statement of changes in equity for the year ended __ 202x
- Appendix IV - Model cash flow statements for the year ended ___ 202x
5. Distributable profit
In the context of the accounting legislation reform process described above, the rules for distributing company profit contained in Article 273 of the Revised Corporate Enterprises Law have been amended, and, in general terms, currently provide that:
- The profit taken directly to equity may not be distributed either directly or indirectly (this relates to adjustments for positive changes in value and subsidies, donations and bequests recognized directly in equity).
- Any distribution of profit is prohibited unless the amount of unrestricted reserves is at least equal to the amount of research and development expenditure that appears on the asset side of the balance sheet.
The ICAC ruling of March 5, 2019 expands upon the concept of “distributable profits”. This is defined as the aggregate result for the year, as reflected in the approved balance sheet, with the following adjustments being made:
- Positive: (1) unrestricted reserves and (2) retained earnings.
- Negative: (1) prior-year losses. However, the amount by which this result exceeds the positive adjustments will only be included as a negative adjustment insofar as it is not offset, materially, by the balance of the legal reserve and other pre-existing restricted reserves; and (2) the part of the result for the year which is required to be allocated to the legal reserve and other obligatory provisions established by the law or bylaws.
The share premium and premium upon subscription of SL shares constitute contributed equity that can be recovered by the shareholders on the same terms as unrestricted reserves and shareholders’ contributions.
Article 28 of the ruling relates to the allocation of results. In this respect, dividends can only be distributed against distributable profits if the equity value is not — or does not become as a result of the distribution — lower than the capital stock for mercantile purposes.