Company Taxation in Spain: taxes for non-residents in Spain
“Every business should own a company in Spain …”
Company taxation in Spain. Taxes for non-residents and benefits of owning a company in Spain.
1) Corporate income tax. Taxation in Spain.
15% for newly created companies and for the first two years since they start making a profit;
General tax rate on social benefits: 25% from the third year since they start making a profit;
There is no regional production tax not any other corporate income tax of any kind.
The company’s expenses are 100% deductible.
2) Dividends distributed to shareholders.
The Parent-Subsidiary Directive (Directive 90/435/EEC) applies to dividends distributed to shareholders when they are legal entities within the European Union;
The bilateral agreements in force apply in order to avoid double taxation on dividends distributed to shareholders when they are natural persons. In the case of dividends distributed to an Italian shareholder who is a natural person that, for tax purposes, is a resident of Italy, a withholding tax of 15% applies.
3) Dividends received from foreign subsidiaries.
Exemption of sums received as dividends from a foreign subsidiary with specific requirements and depending on the country of residence of said subsidiary.
The holding does not necessarily have to have as its sole corporate object the ownership and management and/or administration of investments in foreign companies (the Spanish company can act both as a holding company and as an operating company);
Total exemption of dividends distributed by the holding company to non-resident shareholders regardless of where they live (except for tax havens);
When the holding in Spain receives dividends from its branches, these dividends are completely exempt from taxation and are therefore not considered for the calculation of the tax base.
On the other hand, if the holiding were based in Italy, the dividends received would be subject to further – double – taxation in accordance with Art. 89 of the TUIR;
Shareholders can decide at any time whether they want to benefit from the Spanish holding tax regime (ETVE) or not.
Spain is the country in Europe that has signed the largest number of treaties with Latin American countries.
5) Royalties (Patent box).
A 60% reduction of the tax base is applied for income obtained from the sale of rights on know-how (defined within the same law), licenses, patents, industrial designs, but not trademarks;
The legislation provides for various deductions on corporate tax based on the amount of R&D (Research and Development) activity carried out by the company. In particular, a 12% deduction applies in the case of technological innovation and even higher deductions (up to 42%) can apply in other cases.
Spain is a country that is often looked down upon, but wrongly so. Taxation in Spain is perfectly in line with the needs of company groups and multinationals operating in various markets that want to collect the dividends from their various branches with zero taxation in order to reinvest further operations.