The Spanish tax system, as we have seen, is more flexible and advantageous than some other European tax systems. Corporate tax is no exception to this rule and offers more than favourable rates for small and medium-sized companies.
Corporate Tax is for businesses meaning it does not apply to the self-employed. This tax applies to all resident companies in Spain whether they were directly created in Spain or simply have the tax and social residence there.
The Spanish government, who fiercely encourage foreign investment in the country, has significantly simplified the tax legislation that applies to these companies. Companies based in Spain will be taxed on all their worldwide income, including investment, social benefits and transfers of funds.
It is mandatory to take these conventions into account in order to avoid double taxation between Spain and other countries that could influence how the taxable income is determined.
The taxable period for corporation tax is the accounting year of the company. The financial reports and accounting books are the basic documentation that must be provided within this annual return.
The annual reports must be submitted and the tax paid within 25 days following the 6 months after the end of the aforementioned taxable period.
Keep in mind that in some cases, the creation of several companies can allow the taxable income to be divided in order to make greater savings.
If we were to take the French example, corporate tax is 33% for all companies however, when compared with Spain, this difference between the two becomes quite significant. In Spain, Corporate Tax presents itself in several levels and ranges from 15-30% depending on the turnover of the company. Thus, Spain has a very low rate compared to its European neighbours.
Newly formed companies will only pay 15% on their first 300,000 Euros and 20% on future payments. Companies that charge a sum less than 5 million Euros will only pay 20% on the 300,000 and 25% thereafter. Businesses whose turnover is less than 10 million Euros should pay 25% on the first 300,000 Euros and 30% on the rest. Finally, companies whose annual turnover is more than 10 million Euros should pay 30% of profits for corporate tax.
New companies created from 1 January 2013 onwards can apply the reduced tax rate of 15% on their income under 300,000 Euros and 20% on the rest.