The new reductions to the tax base in the Corporate Income Tax: Capitalization reserve and leveling reserve

Abstract

The new Corporate Income Tax Law incorporates two reductions to the tax base to improve the neutrality of financing and capitalization sources of the companies, in order to favor the companies which are financed with own funds versus those that do by borrowing. On the one hand, we meet the capitalization reserve, regulated in article 25, and, on the other hand, the text adds a leveling reserve which is regulated in article 105. In this work, we make a critical analysis about the new standards which will allow knowing the most controversial aspects of the new regulation as well as its inconsistency with some objectives that justify its adoption.