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Taxation in Spain

Taxation in Spain

Investors operating on the Spanish market are required to pay several taxes, as prescribed by the commercial legislation applicable here. Legal entities established on the local market and foreign companies represented in Spain through a permanent establishment must pay taxes in this country. Our team of Spanish company formation representatives can offer assistance on the taxes applicable to companies in Spain and can present in-depth information referring to taxable periods available here. 

The corporate tax in Spain

Spanish companies are required to pay several taxes, such as the corporate tax and the value added tax. The 25% corporate tax rate is imposed on companies with worldwide income. Spain introduced the minimum corporate tax rate rule on January 1, 2022. Such a rule stipulates that specific entities registered in Spain and with a net turnover of at least EUR 20 million must follow the minimum corporate tax due of 15% applied to the taxable income after specific changes. Besides that, the 23% corporate tax rate applies to companies with a net turnover of less than EUR 1 million per year.

Spanish businesses are also imposed with the business and professional activities tax, which applies to various categories of entities carrying operations in artistic industries. Businessmen should know that this tax can’t be imposed on a higher value than 15% of the taxable profits of the respective entity; our tax advisor in Spain can offer more details on the above-mentioned taxes

Main taxes for companies in spain

Taxation for individuals in Spain

Resident individuals are subject to worldwide taxation on their income produced in Spain while non-residents are only taxed on their income produced in the country. An individual is considered a Spanish resident if he or she spends more than 183 days of the tax year in the country. Spain imposes a progressive personal income tax system. The tax year is generally the calendar year both for individuals and for legal entities. With regard to the taxation of individuals, the following tax rates are available: 

  • 19% for the first EUR 6,000 of taxable income,
  • 21% for taxable income ranging from EUR 6,000 to EUR 50,000,
  • 23% for taxable income ranging from EUR 50,000 to EUR 200,000,
  • 27% for taxable income ranging from EUR 200,000 to EUR 300,000,
  • 28% for any amounts exceeding EUR 300,000.

We recommend the services offered by our accountants in Spain if you want to open a company in this country. Bookkeeping and payroll are among the essential services and procedures related to accounting, and we can explain in detail what they involve. Also, in order not to run into problems or paperwork errors, we can offer assistance for tax registration. Our tax advisor in Spain can tell you more about this topic.

Social security exemptions in Spain

In Spain, there are certain categories of people exempt from paying social contributions, under certain conditions, as follows:

  • if there is an agreement between Spain and the country of origin of the person in question,
  • if the person’s stay in Spain is limited to no more than 5 years and if there is an agreement to this effect,
  • if the employee who lives in Spain pays social contributions in the home country where the workplace is registered.

Therefore, there are certain conditions so that the payment of social contributions in Spain is not mandatory. Our tax consultants in Spain can tell you more if you are a citizen of the European Union living in this country and want to know more about the tax system.

Non-resident income tax rates in Spain

Non-residents with income obtained without a permanent establishment in Spain are subject to the following taxes:

  • general tax rate of 24%, if they have residence in an EU or EEA country, with a lower rate of 19% if there is an effective exchange of tax information,
  • 19% capital gains tax,
  • 19% dividend tax rate,
  • 24% tax rate on royalties.

In this case, the provisions of double taxation agreements signed by Spain with the countries in question apply.

Tax minimization procedures in Spain 

Non-resident individuals and companies are taxed only for the income they obtain throughout their business activities in Spain. According to Spanish law, a resident is a person who has been living for more than 183 days in Spain; also, if a person has business activities here, he or she can also be considered a resident. A foreign investor in Spain should know that he or she has the right to choose if the corporate tax will be paid in Spain or in the country of origin if there is a double taxation treaty between the two states. More details in this sense can be offered by our tax advisor in Madrid.

Small and medium-sized companies can benefit from a reduction of the income tax rate. Our specialists in company formation in Spain can provide further information on this tax measure, guided by our tax advisor in Barcelona or in any Spanish city. It must be noted that from the beginning of 2015, all newly incorporated companies benefit from a corporate tax rate of 15%, applicable to the first two years of activity with taxable profits. Our team can help you set up a company in Spain and tell you more about the taxes that must be paid. Feel free to contact our tax advisor in Spain for information.

Other taxes in Spain

Companies in Spain that are regulated by the provisions of the commercial legislation are legally required to pay a set of taxes, considering that they are commercial entities incorporated with the purpose of obtaining a profit for the activities they carry on the Spanish territory. All Spanish-incorporated companies have to pay the following taxes:

  • company tax – is paid as a percentage of the profits obtained by the company and it is charged at the standard rate of 25%, while newly founded businesses are charged with a rate of 15%;
  • social security tax – paid by the employer for each employee working in the company at the rate of 30.40%, while the tax charged to the employee is 6.45%;
  • value-added tax (VAT) – the standard VAT is established at a rate of 21%, but it may vary according to the field of activity – you can find out more on the VAT rates from our  tax advisor in Spain;
  • reduced VAT rates – companies can also be charged with reduced VAT rates of 10%, 4%, and 0%, depending on the types of services or products they sell on the Spanish market;
  • withholding taxes – the rates at which companies are charged with withholding taxes depend on the tax residency of the company and they can vary be of 0% or 19% for the taxation of dividends and interest, 0%, 19%, and 24% for the taxation of royalties or of 0%, 7%, 15%, 19% or 24% for the taxation of fees for services

Investors are invited to watch the next presentation for further details on the tax minimization procedures available in Spain:

Other VAT obligations in Spain 

Another important tax in Spain is the value added tax (VAT), at the standard rate of 21%. There are reduced rates for certain products and services: 10% for cultural events, hotels, and most drinks and 4% for basic food. Companies that are VAT payers and which are involved in import-export activities must also conclude all the formalities for applying for EORI in Spain

Businessmen who want to open a company in Spain that will be liable for the payment of the VAT must take the necessary steps in order to register for VAT and to make the VAT returns as per the Spanish tax law. Please note that tax registration is mandatory at the time of company incorporation in Spain taxpayers in this country. Our tax advisor in Barcelona can tell you more in this sense.

Companies in Spain can submit the VAT returns on a monthly or quarterly basis and the system applicable to an entity is based on the company’s turnover. Thus, monthly VAT returns are required for legal entities in Spain that have a turnover of more than EUR 6 million in the previous financial period, while businesses with a turnover below this threshold can select quarterly VAT returns; more information on how a company has to pay the VAT can be obtained from our tax advisor in Madrid.

The procedure has to be completed with the Spanish Tax Agency (Agencia Tributaria), which is the institution in charge of the taxation of various taxable entities in Spain, such as natural persons, legal entities, non-resident companies obtaining taxable income in this country and any other type of entity charged for its income.

We recommend foreign investors to talk to our tax consultants in Spain and find out more about the taxes in this country. We also provide bookkeeping in Spain, therefore, contact us for information about the services we offer.