Corporate Tax Rate in Spain: Guide for 2024
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Corporate Tax Rate in Spain: Guide for 2024

Guide to company tax in Spain: calculation and deadlines

Understanding the corporate tax landscape is crucial for companies and legal entities residing in Spanish territory. Corporate tax, or “Impuesto sobre Sociedades,” is a direct tax levied on the profits of corporations and other businesses. As Spain continues to be a vibrant hub for commercial activities, it’s imperative for both local and international entrepreneurs to grasp the intricacies of Spain’s corporate tax rate. This knowledge not only aids in regulatory compliance but also ensures strategic financial planning. Our comprehensive guide for 2024 will navigate you through the corporate income tax in Spain, offering a clear understanding of the various types, rates, and exceptions that could impact your business operations.

consultant calculates corporate tax rate of a company in spain

Corporate Tax in Spain

Corporate tax is a levy imposed on the profits of corporations. It represents a critical aspect of a company’s financial obligations, calculated on taxable income which encompasses revenue minus various operational costs such as cost of goods sold (COGS), general and administrative expenses, and depreciation.

In Spain, the Corporate Tax (Impuesto sobre Sociedades, IS) is applied to entities that are tax residents in the nation, taxing them on their worldwide income. An entity is deemed a tax resident in Spain if it is incorporated under Spanish law or if its registered office or effective management is situated within Spain.

The responsibility of administering corporate tax falls to the Agencia Tributaria, Spain’s national tax agency, which requires annual tax filings from all resident companies.

The corporate tax rate in Spain is applied to the company’s global income and profits. However, the system also includes various incentives for investments in R&D and technological innovation, as well as tax credits to mitigate both domestic and international double taxation.

Spain’s corporate tax framework allows for deductions of accountable expenses with certain exclusions like dividends and penalties. Notably, amortization of fixed assets is deductible if it is verifiable and effective. Capital gains are also taxed at the same rate as other income. Moreover, companies can offset a positive tax base with negative tax bases from previous periods.

The revenue generated from corporate taxes serves as a significant source of income for the Spanish government.

In the intricate world of corporate tax, especially within the diverse landscape of Spain and beyond, navigating your tax obligations can be a daunting task. Whether you’re a multinational corporation or an individual with international interests, understanding and complying with both national and international tax laws is crucial. At Lawants, we specialize in demystifying the complexities of international taxation: contact us today and discover our tax consultancy services.

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Spain’s corporate tax rate in 2024

As of 2024, Spain’s corporate tax rate remains a key component within the national taxation system, primarily levied at a standard rate of 25% on resident companies’ worldwide income. However, there are nuances to this rate depending on the size and type of business.

For instance, companies with a turnover less than EUR 1 million are subject to a reduced tax rate of 23%. Newly established companies benefit from an even lower rate of 15% for the first two profitable fiscal years, under certain conditions.

The corporate tax landscape in Spain is diverse, with different rates applied to various entities:

  • Standard corporate entities: 25%
  • Entities with turnover less than EUR 1 million: 23%
  • Newly created companies (for the first two profitable fiscal years): 15%
  • Banks and credit institutions: 30%
  • Tax-protected cooperatives: 20%
  • Entrepreneurs: 15%
  • Associations and foundations: 10%
  • Canary Islands Special Zone (ZEC) entities: 4%
  • Investment companies: 1%
  • Spanish REITs (SOCIMIs): 0%

We will unpack these rates in the following paragraphs.

Moreover, Spain has introduced a minimum corporate tax rate rule effective from January 1, 2022. This rule stipulates that certain entities with a net turnover of at least EUR 20 million, or those under the special tax consolidation regime, must adhere to a minimum corporate tax due of 15% applied to their taxable income after specific adjustments.

This minimum corporate tax due also applies to credit institutions and hydrocarbon companies at a higher rate of 18%, and for newly created entities at a reduced rate of 10%.

While calculating the minimum corporate tax due, certain tax credits and incentives can be applied to reduce the gross tax due. However, if after applying these incentives the resulting tax due is below the minimum net tax due calculated according to the rules, then the resulting tax due will be considered as the net tax due. Any unapplied incentives due to the application of the minimum net tax due may be carried forward to subsequent years.

It’s important to note that non-resident companies in Spain not operating through a permanent establishment are subject to Non-Resident Income Tax (NRIT) at varying rates depending on their activities and residency status.

Understanding these varied rates and rules is essential for businesses operating within Spain to ensure compliance and optimize their fiscal responsibilities.

Corporate income tax in Spain: history data and changes

Spain’s corporate income tax rate has experienced several adjustments over the years, reflecting economic and policy shifts. Historically, the rate has averaged 31.97 percent from 1981 until 2023, according to the Agencia Tributaria, Spain’s tax agency.

The peak of this taxation occurred in 1984 when corporations faced a high of 35 percent. However, a significant change took place in 2016 when the rate was reduced to its current level of 25 percent, marking the lowest point in the country’s corporate tax history. This adjustment was part of broader fiscal reforms aimed at stimulating business investment and economic growth.

Understanding these historical trends is important for businesses to anticipate potential future changes and adapt their tax strategies accordingly.

Calculation of corporate tax rate in Spain

In Spain, the calculation of the corporate tax rate begins with the net profit as reported in the company’s financial statements, which must adhere to the Plan General de Contabilidad (General Accounting Plan). This figure is then adjusted for tax purposes, taking into account allowable depreciation within prescribed limits and the amortization of goodwill. Additionally, certain provisions are considered tax-deductible, including those for doubtful debts, legal expenses, stock obsolescence, devaluation of securities, extraordinary repairs, and unsold publications.

Capital gains are treated the same as ordinary income without distinguishing between long-term and short-term gains. Tax losses can be carried forward for up to 10 years, providing companies with some flexibility in managing their taxable income over time.

For provisional tax payments, a general rule is applied where each instalment is calculated at 18% of the company’s tax liability from the previous year. However, a different calculation method is used for large companies that exceed a specific turnover threshold in the prior year. These adjustments and provisions are critical for companies to accurately determine their fiscal obligations under Spain’s corporate tax regime.

At Lawants, our expertise lies in offering tailored advice on Spain’s corporate tax rates and their intricate interactions with international tax laws. We specialize in analyzing how these rates affect your business and guide you through strategies to optimize your tax position. Our team stays at the forefront of regulatory changes, ensuring that your company is not only compliant but also benefits from the most favorable tax conditions.

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Who pays corporate tax in Spain?

In Spain, corporate tax is levied on all legal entities that conduct business within the country. A company is considered a tax resident in Spain if it is incorporated under Spanish law, has its registered office, or possesses its effective management office within Spanish territory. This encompasses a wide array of business entities, from large multinational corporations to small local businesses.

For resident companies, corporate tax is applied to their worldwide income. This means that whether the income is generated within Spain or internationally, it is subject to Spanish corporate tax. Non-resident companies are also subject to corporate tax but only on the income that is attributable to their permanent establishments or derived from sources within Spain.

The obligation to pay corporate tax extends across various types of companies:

  • Limited Companies (Sociedades Limitadas): These entities are subject to corporate tax on their profits and are one of the most common forms of business structures in Spain.
  • Public Limited Companies (Sociedades Anónimas): Similar to limited companies, these larger entities must also pay corporate tax on their income.
  • Partnerships (Sociedades Colectivas): While partnerships are less common, they too have a corporate tax liability on the income earned by the entity.
  • Cooperative Societies (Sociedades Cooperativas): These member-owned businesses have a unique set of rules but are still required to pay corporate tax.
  • Branches of Foreign Companies: Branches operating in Spain are treated as permanent establishments and must pay corporate tax on the income attributable to their activities in Spain.

Understanding which entities are required to pay corporate tax and how they are classified as residents is essential for compliance with Spanish tax regulations. Each type of company has specific obligations that must be understood and adhered to in order to avoid penalties and ensure smooth business operations.

Read also: Beckham Law in Spain: 2024 Guide for Expats to Save on Taxes

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Corporate tax for limited companies

Limited companies, known as “Sociedades Limitadas” in Spain, are subject to the standard corporate tax rate. These entities are one of the most prevalent business structures due to their flexibility and limited liability for shareholders. The corporate tax they pay is calculated on their net profits, which include all revenues after deducting allowable expenses such as COGS, operational costs, and depreciation.

The corporate tax rate for limited companies is a critical component of their financial planning and compliance obligations. It is essential for these companies to keep accurate records and adhere to the tax regulations set forth by the Spanish authorities to ensure they meet their fiscal responsibilities. The specific rate and details on how it is applied will be further discussed in the subsequent section of this guide.

Corporate tax for sole traders and freelancers

In contrast to limited companies, sole traders and freelancers in Spain are not subject to the corporate tax rate.

Instead, their business income is taxed through the Personal Income Tax (IRPF, “Impuesto sobre la Renta de las Personas Físicas”) system. This progressive tax rate ranges from 19% to 47%, contingent upon the individual’s earnings and the specific autonomous community in which they reside.

Sole traders and freelancers must be diligent in reporting not only their income but also Value Added Tax (VAT) where applicable. Nonetheless, the Spanish tax framework provides an array of deductions that can mitigate their taxable income.

These deductions can encompass social security contributions, office-related expenses such as rent and utilities, and even internet services, all of which are integral to the operation of their independent businesses. These tax benefits are essential for sole traders and freelancers to understand in order to maximize their financial efficiency.

Corporate tax for partnerships

In Spain, partnerships occupy a distinct position in the tax landscape. While they are required to pay corporate tax, the rates and regulations differ from those applied to corporations. The unique nature of partnerships often means that the partners themselves are taxed on their share of the profits through their personal income tax (IRPF), rather than the partnership paying a separate corporate tax.

For partnerships that are structured as flow-through entities, where profits pass directly to the partners, the taxation rules vary. These entities do not pay corporate taxes at the entity level; instead, the partners report their share of the profits on their individual tax returns and are taxed according to their personal income tax rates. This approach ensures that profits are taxed once at the individual level, maintaining a transparent and straightforward tax obligation for partners within these business structures.

Corporate tax for holding companies

Holding companies in Spain, known as “Entidades de Tenencia de Valores Extranjeros” (ETVE), enjoy a special tax regime designed to encourage foreign investment, the ETVE regime. These entities primarily hold and manage securities and shares of foreign companies, and their corporate tax treatment is favorable. The ETVE regime provides a significant tax exemption on dividends received from foreign subsidiaries and on capital gains derived from the sale of such shares, under certain conditions.

The rationale behind this favorable treatment is to make Spain an attractive country for international investors looking to establish holding companies that can act as intermediaries for their investments worldwide. This exemption from corporate tax for dividends and capital gains aims to prevent economic double taxation and promote economic growth through international expansion. However, it’s important to note that holding companies must meet specific requirements to qualify for these tax benefits, including substance requirements and the need to carry out genuine business activities.

Corporate tax for newly created companies

In an effort to support entrepreneurship and stimulate business growth, Spain offers a reduced corporate tax rate for newly created companies. These fledgling enterprises benefit from a favorable 15% tax rate for the first two tax periods in which they generate a profit. This incentive is designed to ease the financial burden during the critical early stages of a business’s development.

However, there are specific exclusions to this rule. The reduced rate does not extend to equity companies—those that do not engage in an active trade or business—or to entities that are part of a larger national or international group. Additionally, if the company’s business activity was previously undertaken by an entity or individual related to the company, the reduced tax rate may be forfeited. This provision ensures that the incentive is reserved for truly new ventures and not merely restructured or rebranded existing businesses.

Corporate tax for startup companies

Startup companies in Spain, recognized for their innovative and scalable business models, are granted a unique opportunity to benefit from a reduced corporate tax rate of 15%. This incentive applies to the first tax period when the startup records positive taxable income and extends to the subsequent three periods, provided the startup maintains its eligibility as defined by law.

To qualify as a startup, certain criteria must be met: the company should be newly formed or registered within the last five years—or seven for strategic sectors like biotechnology, energy, and industrial. Startups must not result from corporate restructuring such as mergers or spin-offs of non-emerging companies. They should not have distributed dividends, be publicly traded, or be part of a group that doesn’t meet these conditions. Additionally, at least 60% of their workforce should be under employment contract in Spain, and their registered office or permanent establishment must be located within the country.

However, startups lose entitlement to this tax advantage if they no longer meet these criteria, surpass five or seven years since incorporation, are acquired by a non-startup entity, exceed a net turnover of EUR 10 million, engage in environmentally detrimental activities, or if stakeholders or directors are convicted of offences under the Start-up Law. These provisions ensure that the reduced tax rate supports genuine startups in their formative years.

Corporate tax for groups of companies

In Spain, groups of companies may opt to be taxed under a consolidated tax regime, a framework that allows for the collective taxation of all entities within the group as a single taxpayer. This special regime streamlines the tax process by eliminating the need to file individual tax returns for each company, instead consolidating their taxable incomes into one. The consolidated tax regime is designed to simplify the tax obligations and potentially reduce the tax burden for groups of companies, fostering an environment that encourages corporate growth and financial synergy within the group.

Corporate tax for foreign companies

Foreign companies operating within Spanish borders are subject to taxation on income generated in Spain through the Non-resident Income Tax (IRNR). This tax is levied on earnings that arise from Spanish sources, ensuring that non-resident entities contribute to the Spanish fiscal system proportionally to their economic activities in the country. The IRNR is a pivotal aspect of Spain’s tax framework, as it ensures a level playing field by taxing foreign companies on their Spanish-sourced income, aligning with international tax principles and promoting fair competition.

Whether you’re looking to expand internationally or streamline your existing operations in Spain, our tax consultants are here to provide you with the insights and strategies you need. We understand the nuances of Spain’s corporate tax system and how it aligns with international standards and treaties, enabling us to offer you the most advantageous tax planning advice.

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How to submit corporate tax in Spain?

Submitting corporate tax in Spain involves a streamlined online process through the Agencia Tributaria’s website.

Companies are required to provide the following documents:

  • Form 200: The annual corporation tax return, which is due 25 days after the six-month mark from the end of the tax year.
  • Form 202: Pre-payment of the corporation tax, which must be filed three times annually in April, October, and December.
  • Form 220: Specifically for groups of companies, detailing their tax obligations.

These forms collectively ensure that the Spanish tax authorities have a comprehensive record of a company’s fiscal responsibilities and that businesses remain compliant with the country’s tax regulations.

The corporate tax year in Spain: important deadlines

In Spain, the corporate tax year aligns with a company’s accounting year and must not exceed 12 months. Critical spanish tax return deadlines include:

  • Tax Return Filing: Companies must file their tax return within 25 calendar days after six months following the end of their tax year. For instance, if the tax year concludes on December 31st, the filing window is from July 1st to July 25th of the subsequent year.
  • Advanced Payments: Companies are obligated to make three advanced payments on their annual tax liabilities during the first 20 days of April, October, and December.
  • Exceptions: Certain entities, such as investment companies, may be exempt from making advanced payments or filing a corresponding tax return.

It is essential for companies to adhere to these deadlines to ensure compliance with Spanish tax regulations and avoid any potential penalties or fines.

Corporate tax exemptions and credits in Spain

Spain’s corporate tax framework offers a range of exemptions and credits designed to foster economic growth and innovation.

As we have seen, sole traders and freelancers are not subject to the standard corporate taxes, and newly profitable companies enjoy a reduced rate of 15% for their first two profitable tax periods. While foreign dividends and capital gains once enjoyed full exemption, they now receive a 95% exemption, subjecting only 5% to taxation.

Corporate tax credits are abundant in Spain, with incentives such as a 99% credit on income from local services and a 50% credit for income generated in Ceuta and Melilla. Research and development activities are particularly encouraged, with a 25% credit on R&D expenses, a 17% credit for related staff expenses, and an 8% credit for R&D assets. Technological innovation is promoted through a separate 12% tax credit.

The creative industries also benefit, with film productions and performing arts eligible for substantial credits. Film producers can claim a 30% credit on the first €1 million invested and 25% on additional contributions up to €10 million. Live performances and musicals enjoy a 20% credit on the first €500,000 of expenses.

To support employment of disabled individuals, companies can claim a €9,000 tax credit for each disabled worker hired on a full-time permanent contract (33%-65% disability) or €12,000 for disabilities over 65%.

Regarding deductions, businesses may claim depreciation on assets such as warehouses, furniture, and computers at varying rates. Financial expenses are deductible up to 30% of operating profit, with severance pay also deductible under certain conditions.

Spain also offers specific incentives such as the ETVE regime for foreign securities holding companies, which under certain conditions exempts income from foreign sources and distributions to partners. The restructuring operations enjoy a tax neutrality regime, facilitating mergers and other corporate changes.

The Canary Islands Special Zone stands out among territorial incentives, allowing entities to benefit from a significantly reduced Corporate Tax rate of 4%. The Patent Box regime provides up to a 60% reduction in positive income from the transfer of certain intangible assets.

Lastly, the Basque Country and Navarre have the autonomy to regulate their own tax systems, offering unique opportunities for businesses operating within these regions. Ceuta and Melilla also provide specific tax incentives to stimulate economic activity.

accountant writes down the corporate tax of a company

Other taxes in Spain

In the Spanish fiscal environment, businesses must navigate a variety of taxes beyond the corporate tax. These include:

  • Real Estate Tax: Levied on property ownership.
  • Tax on Increase in Value of Urban Land: Applied to the sale of urban land.
  • Vehicle Tax: Imposed on vehicle ownership.
  • Construction Tax: Charged on construction projects.
  • Fees for Waste Collection: Paid for municipal waste services.

The Business and Professional Activities Tax is a local tax on the performance of business, professional, or artistic activities within Spain. Factors such as activity type, location, and premises size determine the tax amount. Companies with a net turnover below EUR 1 million are exempt from this tax.

Here’s a table summarizing other key tax rates relevant to businesses:

Tax TypeResident Rate (%)Non-resident Rate (%)
Personal Income Tax (PIT)Up to 47*24** (19*** for EU/EEA)
Value-Added Tax (VAT)Standard: 21
Withholding Tax (WHT)Dividends/Interest/Royalties: 19 / 19 / (19 or 24)*19 / 19 / (19 or 24)*
Capital Gains Tax (CGT)Corporate: Normal CIT rate; Individual: 2619
Net Wealth/Worth TaxUp to 3.5%****
Inheritance and Gift TaxUp to 34%****

(*) Maximum rate varies by autonomous region, reaching up to 54%.

(**) Standard rate for non-residents.

(***) Reduced rate for EU/EEA residents.

(****) State tax scale rate unless autonomous community has its own scale.

Spain’s standard VAT rate is 21%, with reduced rates of 10% and highly reduced rates of 4% for certain goods and services. The Canary Islands, Ceuta, and Melilla have alternative taxation systems with different rates applicable to them.

Understanding these taxes and their implications is essential for businesses operating in Spain to ensure compliance and optimize their fiscal strategy.

Corporate tax fines in Spain

In Spain, adherence to corporate tax regulations is enforced with a system of penalties for late or incorrect tax returns. These penalties are proportionate to the delay in filing.

For example, a return filed three months late incurs a fine of 5% of the tax due, while returns filed over a year late attract a 20% fine. Additionally, there is a charge of 5% interest on overdue payments that exceed one year.

The Spanish tax authorities also take a firm stance against corporate tax evasion. Companies found to have evaded taxes can face severe fines, potentially up to twice the amount of tax that was avoided. Furthermore, fiscal representatives in Spain responsible for the evasion may face criminal charges, including prison sentences. This strict penalty regime underscores the importance of compliance and accuracy in corporate tax affairs within Spain.

Advice on corporate taxes in Spain

Navigating the complexities of the corporate tax system in Spain can be a daunting task for businesses of all sizes. To ensure accuracy and compliance, many companies opt to engage the services of professional accountants.

For those organizations where a full-time, in-house accountant is not viable, outsourcing to an external consulting accountant becomes a practical solution. When selecting an accounting consultant, it’s essential to choose an accredited professional with a proven track record. Recommendations from trusted sources can also guide you to reliable experts.

At Lawants, we provide specialized tax consultancy tailored to your business needs, ensuring that your company remains compliant and strategically positioned for tax efficiency in the Spanish market. Our team of experts is equipped to handle the intricacies of corporate taxes, offering peace of mind and allowing you to focus on growing your business.

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