An inter-ministry commission is preparing an Entrepreneur Law and working on designs for a package of tax stimuli that will provide an incentive for business initiatives that are "timely, moderated and for specific groups" that will receive some deductions for investments in companies listed on the Alternative Stock Market (MAB following the Spanish abbreviation).
The proposal comes from the Ministry of the Economy via the Secretary of State of Corporate Support. It is also supported by the Ministry of Industry. Still, the Ministry of Finance will have the final word. It is evaluating the impact that the measure could have on tax revenues so as not to jeopardize Spain's attempt to meet its 2012 debt/GDP goal of 5.8%.
In any case, although the total amounts will obviate including this measure in the law that the Government wants to bring to the Council of Ministers next Friday, sources from the Prime Minister's office have confirmed that "it will be approved within a broader tax reform as soon as possible." The goal for the tax measure is two-sided. On the one hand, it will attempt to provide another alternative for the business community to find funding, particularly small- and mid-size companies. On the other hand, it will propel economic growth by means of raising new investment funds.
For that, the tax deduction formulas that are on the table for Cristóbal Montoro's department are pointing toward a deduction for earnings that are reinvested in a company, on the one hand, and a standard income tax deduction for investors that invest in stocks on the MAB. The latter deduction would apply for companies and private investors who agree to hold their investments for a minimum of three years.
We have to remember that improving tax advantages for reinvested dividends is one of the promises that the Partido Popular made during its electoral campaign and that Prime Minister Rajoy vowed to modify "taxation on non-distributed earnings in a way that those dedicated to acquiring new shares pay ten percent less in taxes than those destined for profit distribution."
