Taxes in Spain

Today, more and more people are coming to live in Spain, particularly young adults who intend to take advantage of not only the good life here in Spain but also to start up economic business activity. However, before launching any sort of business project, it is important to know all about the different taxes in Spain as a host country.

The taxation system in Spain

En Espagne, le système de taxation espagnol s’exécute sur trois niveaux : national, régional et local.

  • Les taxes nationales : prélevées par l’inspection du fisc gouvernemental central espagnol, appelée Agencia Estatal d’Administración Tributaria.
  • Les taxes régionales : prélevées par les gouvernements de communauté autonomes.
  • Les taxes locales : prélevées par les autorités municipales.

Tax returns

Everyone who undertakes some sort of commercial activity on Spanish soil must send a tax return to the tax office. 3 types of tax statements exist:

  • Declaring Corporate Income Tax:

Each year, the declarations of corporate tax must be submitted and the tax paid within 25 days following the 6 months after the end of the taxable period. In some cases, starting several businesses can divide the taxable income to allow greater savings.

  • Declaring VAT:

For all those doing any business in Spain, and if the self-employed, they will be subject to Income Tax. All expenses related to business should be directly deducted from your income. For new entrepreneurs, who started their business from 1 January 2013, a rate of 20% of their annual net income is applicable during the first two years of operation. Filing the declaration forms is done annually to the administration at the Agencia Estatal de Administracion Tributaria (AEAT) or directly to the banks, most of whom have an agreement with the Spanish Tax Agency.

  • La déclaration de la TVA

In Spain, VAT registration depends on the operations carried out by the company. Self-employed workers need to register for Spanish VAT and submit tax reports every 3 months or every month to the authorities.

Corporate Income Tax

If you start your own company in Spain, the company will then be subject to corporate income tax (Impuesto de Sociedades EI). This tax is levied on any Spanish company. The Spanish government wants to encourage foreign companies to do business in Spain and it is for this reason that recent legislation regarding corporate tax has undergone changes to render the organisation simpler. The tax threshold for resident companies is 30%. For small businesses, a reduced tax rate of 25% applies to their taxable income under 300,000 Euros. Any profit above this is taxed at the standard rate of 30%. However, in order for this to be accepted, companies must have a turnover of less than 10 million Euros.

For the tax years of 2011, 2012 and 2013, small businesses with fewer than 25 employees and with a turnover of less than 5 million Euros a year that maintains or creates jobs, are taxed at a rate of 25% for the first 300,000 Euros of earnings and 30% on the rest.
From 1 January 2013, newly established companies benefit from a new corporate income tax at a reduced rate for their first year in which the company makes a profit.

Tax for Economic Activity

The Impuesto sobre Actividades Económicas IAE is a direct and obligatory tax made payable annually and managed by the city council. The base sum is constant regardless of the scale of economic activity within a company. Individuals themselves are exempt from this tax. The same goes for companies whose net turnover is less than 1 million Euros and for those that started business in Spain during the first two tax years.

The amount of tax due is based upon several factors such as the type of business, the area occupied by the company, the net amount of sales etc. The minimum rates are published by the government and can be altered by each municipality.

Value-Added Tax

Value-Added Tax (IVA Impuesto sobre el Valor añadido) is a tax which is the backbone of indirect taxation within the Spanish system. It takes into account three types of transactions:

      • First, the supply of goods of services performed by the contractors; secondly, the intra-community acquisition of goods; thirdly, importation of goods ;
      • Secondly, the intra-Community acquisition of goods ;
      • Finally, the importation of goods.

    In 2014, the Spanish tax authorities approved a new VAT reform which came into force on 1 January that year. The changes are as follows:
    • - The standard rate changed from 18% to 21%
    • - The reduced rate changed from 8% to 10% for certain consumer products (food, culture, transport etc.)
    • - The special rate remained unchanged at 4% (basic food, press, health services and facilities etc.)

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