Any company wanting to settle in Spain wants to do so quickly and easily. However, before launching any entrepreneurial project, one must be aware of the company’s taxation.
The tax system of the company in Spain
Most importantly, starting a business in Spain requires an ICF – a tax identification code. This number identifies the taxpayer and thus facilitates the fiscal management of the company itself. This code is more reliable than other forms of identification such as a name or address. In Spain, fiscal management includes tax payment, social security charge payment in connection with the company’s economic activity in Spain. Every entrepreneur will be taxed either personally or for the company’s activity.
Advantages of Spanish tax management
Once your business is off the ground, you should be aware of the subtleties of Spanish taxation in order to maximise the benefits. Fiscal policy in Spain reduces corporate taxes to encourage new businesses so it’s worth recognising the tax benefits applicable for Spanish companies:
- VAT repayment either monthly or quarterly (21%)
- No wealth, inheritance or donation tax
- No professional or apprenticeship tax
- No Annual Lump Sum Taxation (Imposition Forfataire Annuelle – IFA)
- Social charges of around 30.6% of gross salary and 250 Euros per month for lump-sum management
- 25% of corporate income tax for companies whose turnover does not exceed 8 million Euros.
- Shares may be registered or bearer (SA)
- Possibility of a single shareholder, physical or moral (SL and SA)
The Spanish tax system: An interesting taxation
Companies in Spain are subject to several types of tax, including:
- Tax on economic activity: Spain levies a tax on economic activity which must be paid by companies, freelancers and professionals. It is payable annually for the activities of companies made in the territory of the commune..
- Corporate tax: This is levied on any Spanish company. The government is keen to encourage foreign company production in Spain and so the laws relating to corporate tax have recently undergone some changes to make the organisation and structure simpler. The tax threshold for companies remains below that of other major European countries, with a 30% tax base at 35% on profits of the largest companies according to each sector (25% for SMEs).
- VAT: In Spain, the added tax value is called IVA – Impuesto al Valor Añadido. There are three different rates of VAT: the standard rate (21%), the reduced rate (10%) and the super-reduced rate (4%).
Spanish contribution scheme
Every person working in a company whether they are an employee or an employer is required to contribute. In contrast to this, work accident and occupational illness insurance is solely at the employer’s expense. He is also responsible for the payment of employer and employee contributions. Various taxes are added to employer and employee contributions such as tax on personal income (IRPF) and charges on the manager’s salary.
- In terms of these charges on the manager’s salary, in Spain they are fixed and range between 177.94 Euros and 255.86 Euros.
- As for social contributions, in Spain an employee pays just 6.25%.
- And the employer’s social charges, one employer for each employee in the company will pay a tax of 30.6%.
- Spanish income tax varies between 24 and 52% and is deducted directly from the source of each person´s gross salary.