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What is Pillar 2 and the Complementary Tax?

On December 21, 2024, Law 7/2024, which adapts Spanish legislation to the European Council Directive (EU) 2022/2523, was published in the Official State Gazette (BOE).
Main objective: Implementation of Pillar 2 of the OECD, ensuring that large multinational groups are taxed at a minimum of 15% in each country where they operate.
Pillar 2 regulation: it is regulated through the Global Anti-Base Erosion Rules (GloBE). These rules indicate that if a jurisdiction does not collect at least 15% tax, the group must pay additional tax to cover the difference.
Compliance/achievement of the objective: introduction of the Complementary Tax (hereinafter “IC”), a tax designed to ensure that multinationals do not pay less than 15% in taxes in any jurisdiction where they operate.

What are its objectives?

To limit the battle between countries to reduce their corporate tax rates in order to attract investment.
To fight against tax base erosion and profit shifting.
Avoiding income relocation and ensuring that companies are taxed fairly.
Fairer and more effective overall minimum taxation

Who is affected by the new tax?

Large business groups: those whose consolidated net turnover reaches 750 million euros in at least two of the four fiscal years prior to the fiscal year analyzed.
Scope of application: entities located in Spanish territory (with certain particularities to be defined in the foral territories of the Basque Country and Navarra).
Exception: IC quota is not required in jurisdictions where the group complies with the transitional safe harbors and can apply simplified calculations.

Date of application

In general: tax periods beginning on or after January 1, 2024

Tax Modalities:

Modality	National IC	Primary IC	Secondary IC
Objective/concept	Ensure that profits generated by a group in Spain are taxed at least 15%.	Tax that Spanish parent companies (the ultimate or intermediate parent of a group) have to pay when their foreign subsidiaries do not reach the minimum15% effective tax rate.	Tax income generated outside Spain when the parent company of the group, located in another country, has not applied the Primary ICbecause it is not subject to the Pillar 2 rules or because it has not implemented them, and there are subsidiaries within the group whose effective taxation is less than 15%.
When does it apply?	From January 1, 2024.	When foreign subsidiaries are taxed below 15% effective tax rate.	From January 1, 2026, when: Parent company of the group is outside Spain. The Primary IC has not been applied in that country. The group has subsidiaries (in any country) that are taxed below 15%.
Affected entities	Foreign multinational groups based on profits generated in Spain.	Spanish parent companies with foreign subsidiaries of the group that do not meet the minimum taxation thresholds.	Entities residing in Spain (even if they are not the parent company) that are part of a multinational group, with foreign entities that do not reach the minimum taxation, and no parent company of the group has applied it.
	Spanish multinational groups for their operations in Spain.
	Domestic groups (those operating only in Spain) have a temporary exclusion of 5 years.
What does it oblige to do?	Spanish entities must ensure that profits are taxed at least 15% in Spain.	The Spanish parent company must calculate and pay the tax differential between what the foreign subsidiary taxes and the 15% (minimum established).	The Spanish entities of the group have to collect the supplementary tax on such untaxed income.
		This payment is calculated according to the percentage of participation that the parent company has in this subsidiary (e.g.: if the parent company owns 80% of the subsidiary, it will only cover 80% of this differential).
Who is responsible for its payment?	All Spanish entities that are part of the multinational group (or domestic group), even if the parent company (SPU) does not own 100% of the shares in those entities.	General rule: highest parent in the group hierarchy (the ultimate parent or UPE)	The corresponding Spanish entity, although there may be solidary liability.
		If the ultimate parent cannot take over, then the payment will be made by an intermediate parent.

Obligation to declare and pay taxes in Spain:

Obligation to file an informative declaration.
- Exception: when the ultimate parent company resides in Spain or when the group already files this declaration in another country and maintains an information exchange agreement with Spain.
Responsibility for the payment of the tax: only one entity will be responsible for paying all the tax debt of the group in Spain and maintaining the relationship with the Tax Administration:
- Ultimate parent if resident in Spain
- If the ultimate parent does not reside in Spain - the Spanish entity with the highest net asset value.
- The other Spanish entities of the group à are jointly and severally liable for the tax debt.
Deadlines for filing the tax return:
- Transition period (2024-2026): before the last day of the 18th month after the end of the first tax period in which the CI is applicable.
- Subsequent years: before the last day of the 15th month after the end of the tax period.

In an increasingly complex tax environment, it is essential to have the right advice. At Baker Tilly, we are on hand to help our clients understand and comply with the new Pillar 2 obligations, ensuring efficient tax management tailored to their business.

Implementation of Pillar 2 in Spain: Law 7/2024 and the New Complementary Tax

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