New company within a corporate group: when does the 15% reduced rate not apply?

For newly incorporated companies, a reduced rate of 15% applies, which has become established as one of the key tax incentives when starting new economic activities. Its practical application is giving rise to disputes with the tax authorities, particularly in cases where the company is created within a pre-existing business structure.

In this context, the judgment of the High Court of Justice of Castile and León of 28 November 2025 (STSJ CL 4976/2025) is relevant for its interpretation of the concept of a group under Article 42 of the Commercial Code for the purposes of excluding the application of this tax incentive.

The 15% reduced rate and its exclusion due to group membership

Newly incorporated entities are taxed at the reduced rate of 15% in accordance with Article 29.1 of Law 27/2014 on Corporate Income Tax, both in the first tax period in which they have a positive taxable base and in the following one.

The same provision excludes entities that form part of a group within the meaning of Article 42 of the Commercial Code.

In addition, the incentive will not apply in cases where a new economic activity is not deemed to have commenced, such as where there is continuity with a previously carried on activity or a link to activities previously undertaken by related persons or entities.

Article 42 of the Commercial Code as a point of friction

Article 42 of the Commercial Code defines the existence of a group on the basis of control, understood as the ability of one company to exercise, directly or indirectly, decision-making power over another. This control arises from circumstances such as holding a majority of voting rights or having the power to appoint the majority of the directors.

Therefore, in the commercial and accounting sphere, the concept of a group has been linked to the existence of a parent company and its subsidiaries. However, in the tax sphere, this approach is insufficient.

Commercial group versus coordination group

There is a growing debate between taxpayers and the tax authorities. Taxpayers argue that no group exists within the meaning of Article 42 of the Commercial Code where there is no relationship of control between companies, but merely a coincidence of shareholders or directors.

From this perspective, it is often argued that the situation involves a coordination group, a concept of accounting origin not expressly provided for in Article 42 of the Commercial Code, in which several entities operate under common management without there being a relationship of control between them. This approach has been supported in certain cases by positions of the ICAC and administrative rulings, which has contributed to a degree of legal uncertainty.

However, the tax authorities have taken a different view, focusing on the existence of effective control and a unity of economic decision-making.

The case decided by High Court of Justice of Castile and León 4976/2025

The judgment of the High Court of Justice of Castile and León examines a representative case of this issue. The entity had applied the 15% reduced rate on the basis that it was a newly incorporated company. However, the tax authorities rejected this treatment on the grounds that the entity formed part of a corporate group.

The decisive factor was that the same individual held majority or full shareholdings in several companies and, in addition, performed management functions in all of them. This circumstance was interpreted by the tax authorities as a clear indication of the existence of a single control and a unity of management.

In response, the taxpayer argued that there was no relationship of control between the companies, but merely a subjective coincidence, which would fall within the category of a coordination group and would not have effects for these tax purposes.

The dispute therefore centred on determining whether common control exercised by an individual was sufficient to establish the existence of a group for the purposes of Article 42 of the Commercial Code.

The court’s approach: the primacy of effective control

The court dismisses the appeal and upholds the tax authorities’ position, adopting a clearly substantive interpretation of the concept of a group. It considers that a group exists where there is a single control and a unity of decision-making, regardless of whether that control is exercised through a company or by an individual.

In this regard, the judgment considers that the coincidence of a majority shareholder and director across several entities evidences the existence of a common power of direction. This approach is supported by Supreme Court case law, which has established that the control referred to in Article 42 of the Commercial Code may be exercised, directly or indirectly, by an individual where that person concentrates decision-making power over several entities.

As a result, the court concludes that the entity cannot benefit from the 15% reduced rate, as it forms part of a business structure under unified control.

Exclusion from the incentive

The court does not confine itself to a literal interpretation of Article 42, but rather takes into account the purpose of the tax provision that excludes the incentive.

Specifically, the aim is to prevent a single economic operator from using different entities to repeatedly access the reduced rate, as the tax benefit is intended to support genuinely new business ventures rather than existing structures.

Practical implications for applying the 15% reduced rate

Following this judgment, a rigorous review is required when applying the 15% reduced rate in cases where a new company is integrated into a pre-existing business environment.

Accordingly, it is necessary to assess whether factors are present such as an individual holding significant interests in several entities, overlap in management bodies, or the existence of a common business direction across the companies. These elements may lead the tax authorities to conclude that a group exists within the meaning of Article 42 of the Commercial Code.

All of this may lead not only to an adjustment of the tax rate applied, but also to the imposition of late payment interest and, potentially, penalties.

Conclusion

The High Court of Justice of Castile and León 4976/2025 consolidates an interpretation of the concept of a group that is clearly oriented towards economic reality. As opposed to formal approaches based on corporate structure, the courts are prioritising the existence of effective control and a unity of decision-making.

Accordingly, the creation of a new company within a business structure does not, in itself, guarantee access to the 15% reduced rate. The key lies in determining whether the entity operates in a genuinely autonomous manner or, on the contrary, forms part of a business group under unified control.

For this reason, before applying this tax incentive, it is essential to analyse each case individually and properly assess the risks, as otherwise it may become a significant source of adjustment by the tax authorities.

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