Residence

According to Spanish law any company incorporated in Spain, with a registered office in Spain or its effective management in Spain, is resident in Spain and subject to Spanish tax. Resident companies are charged corporation tax on worldwide profits and capital gains. Non-resident companies are taxed on their Spanish-source income and gains, according to the guidelines of the relevant tax treaty. Branches are generally taxed in a similar way to subsidiaries.

What is the taxable income?

The taxable income is the amount left over when deductible expenses are subtracted from the profits, based on the balance sheets of the company. Some expenses are not considered deductible for tax purposes (e.g. penalties, certain provisions and gifts). For taxable years 2020, the depreciation rates applicable to tangible assets are limited to 70% of the maximum rates provided by law for corporate taxpayers with a turnover exceeding €10 million.

What are the tax rates applicable to 2020?

The full rate of corporate tax in Spain is 30%. For small and medium sized companies (companies with a turnover below €10 million in the previous year) there is a reduced rate:

• Small companies (between 1 and 24 employees): 20% for profits up to €300,000 and 25% for those with profits over that threshold.
• Medium-sized companies: 25% for profits up to €300,000 and 30% for companies with profits over that threshold.

Losses

Operating losses may be carried forward for up to 18 years, starting from the first period in which profits are earned. The carry back of losses is not permitted. For tax periods from 2001 to 2015, limitations apply on the use of the net operating losses if it is a big company.

What are the allowances and deductions in Spain?

Deductions are available for investments in the environment, double tax relief on dividends (subject to certain requirements), double tax relief for capital gains derived from the transfer of shares (under certain circumstances) and extraordinary profits reinvestment.

Capital gains derived from a holding non-resident company are exempt if there is a treaty for double taxation that includes an exchange of information clause with that country or if the paying entity is subject to a tax equivalent to the Spanish corporate income tax (subject to certain requirements).

Tax Year

The tax year coincides with the accounting period. The tax period must not exceed 12 months.

When is corporation tax due?

The corporate tax must be filed and taxes paid within six months and 25 days of the close of the fiscal year. Corporations are required to make three advance payments of income tax in April, October and December of each year.

Other Taxes on Corporations

Payroll tax – Withholding tax on income from employment is applicable on payroll (i.e. in relation to personal income tax).
Social security – Read our article Employment, Payroll and Dismissal for more information.
Council tax – Read our article Council Tax in Spain for more information.
VAT – Read our article Spanish VAT (IVA) for more information.
Capital duty – A 1% capital duty applies to the reduction of capital gain and upon liquidation. However, the setting up of companies and the increase of share capital are not subject to capital duty.

I have an inactive company, do I have to declare?

Yes, the declaration must be made even if the company is inactive.

Value Added Tax (IVA): This tax is applicable to any taxable supply of goods or services made in Spain by a taxable person as part of their business. It is not restricted to the provision of goods and services by way of sale but also applies to other forms of transaction. For VAT purposes, the Spanish territory is the Peninsula and the Balearic Islands. It does not include the Canary Islands, Ceuta, or Melilla.

Scope and Rates

The standard rate of VAT is 21% (since 1 September 2012).

Are there any reduced rates, zero rates, or exemptions?

Yes. There is a reduced rate of 10% (since 1 September 2012) for certain goods and services, including but not limited to the following:

• Food and drinks.
• Residential renovations and alterations.
• Water supplies.
• Certain buildings used for residential purposes including rentals with an option to buy.
• Passenger transport.
• Hotel and restaurant services.

There is a special reduced rate of 4% for certain acquisitions and importations. This is applied to all items that are considered to be of basic and primary need.

Exemptions with input tax recovery (zero-rate supplies) include but are not limited to:

• Exports.
• Financial transactions outside the European Union (EU) Member States.

Exemptions with no input tax recovery (exempt supplies) include but are not limited to:

• Health and welfare related supplies.
• Education.
• Cultural services by bodies governed by public law.
• Financial transactions.
• Insurance.
• Certain games of chance (gambling).
• Certain supplies by public post offices.
• Real estate transactions (certain transfers of land and second transfers of real estate).

VAT on Property Sales

As of 1 January 2013, all sales of new property are subject to a 10% VAT (IVA) charge and a stamp duty of 1.5% of the sale price. For second-hand property sales, a tax of 8-10% is levied on the sale price. In this case, it is not VAT (IVA) but a transfer tax (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados). It is not synonymous with the UK stamp duty. This transfer tax is determined by the autonomous community where the property is located.

Registration: who is required to register for Spanish VAT?

Self-Employed Individuals

Autónomo status is the Spanish equivalent of self-employed or freelance. It also covers people operating unincorporated small businesses. Anyone engaged in any type of independent economic activity in Spain, whatever their profession, is obliged to register as autónomo with the tax office, declaring their economic activity and VAT obligations.

Read our article Starting a Business in Spain – Registration of self – employment (autónomo) to find out more about being self-employed in Spain.

Spanish Entities

If a business makes taxable supplies in Spain it will be required to register and account for Spanish VAT.

Are there any simplifications that could avoid the need for an overseas company to register for VAT?

A business supplying goods or services in Spain is required to register and account for Spanish VAT provided that it is considered to be the Spanish VAT taxpayer of the transactions (that is, the reverse charge rule does not apply). However, it is possible to avoid registering and accounting for Spanish VAT when providing certain supplies. Contact us to arrange a consultation either in person or by phone/email if you require advice on this.

Services Provided by Andalucía Lawyers

• Registration of self–employment (autónomo).
• Obtaining a tax ID number for the business.
• Registering the company for VAT purposes.
• Applications for the refund of VAT.

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