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Spain

Sociedad Anónima (Corporation)

Taxes

Tax residency – A company is tax resident in Spain if it is incorporated under Spanish law, it has its registered office in Spain or its effective management is in Spain.

Basis – Tax resident entities are taxed on their worldwide income.

Tax rate – The general corporate income tax rate is 25%. Other tax rates may apply for certain industries (e.g. banks are taxed at 30%).

Newly created companies are taxed at a reduced rate of 15% in the first period that they obtain profits and the following.

There is a local tax that may not exceed 15% of the presume average profits.

Capital gains – Capital gains are treated as ordinary income and subject to the standard rates. Capital gains arising on the transfer of Spanish companies in which at least a 5% interest (or an acquisition value of over EUR 20 million) has been held for at least one year may be exempt from taxation.

Foreign-source capital gains may be tax exempt if:

  • The Spanish company has at least 5% interest (or acquisition value of over EUR 20m).
  • The subsidiary has been subject to a tax rate of at least 10%.

The exemption is not applicable when the subsidiary is resident in a tax haven, unless it is an EU member state and the company can prove that it has been incorporated and operates for valid business reasons and that it carries on business activities.

Dividends – Dividends are treated as ordinary income. However, there is may be an exemption on dividends received from Spanish companies, in which at least a 5% interest (or an acquisition value of over EUR 20 million) has been held for at least one year.

Foreign-source dividends may be tax exempt if:

  • The Spanish company has at least 5% interest (or acquisition value of over EUR 20m).
  • The distributor has been subject to a tax rate of at least 10%.
  • Dividend distributions has not generated a tax deductible expense in the distributor.

The exemption is not applicable when the subsidiary is resident in a tax haven, unless it is an EU member state and the company can prove that it has been incorporated and operates for valid business reasons and that it carries on business activities.

Interests – Interests received is included in taxable income.

Royalties – Royalties received is included in taxable income. However, certain royalties generated from assigning the use of certain intangible assets (originated from R&D activities) may be eligible for a reduction in the taxable base of the percentage resulting from multiplying by 60% a coefficient that may not be greater than one (i.e. the maximum reduction will be 60%).

Withholding Taxes – Dividends paid to non-residents are subject to a 19% withholding tax unless a tax treaty provides a reduced rate or the EU parent-subsidiary applies.

Interests paid abroad are subject to a 19% withholding tax (15% on deposit and bonds), unless rate is reduced under a tax treaty or the interest is paid to a EU resident, in which case it is exempt.

Royalties and technical service fees paid to non-residents are subject to a 24% withholding tax, unless reduced due to a tax treaty. Royalties and technical service fees paid to EU/EEA individuals or entities are usually taxed at 19%, unless it applies the EU interest and royalties directives.

Foreign-source income – Foreign-source income is generally subject to corporate income tax. However, a total or partial tax relief in the form of tax credits or exemptions is available for foreign tax paid.

Losses – Only up to 70% of company taxable income may be offset by net operating losses, which may be carried forward indefinitely. Carry back of losses is not permitted.

Inventory – Accounting results have to be calculated in accordance with Spanish Generally Accepted Accounting Principles (GAAP). Inventory is valued at acquisition price or production cost under the average cost and first in first out (FIFO) valuation methods.

Anti-avoidance rules – Transfer pricing legislation is applicable to all types of transactions between related persons, which must be conducted following OECD’s transfer guidelines and supported by relevant documentation.  Transfer pricing methods allowed are: comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin.

There are no thin capitalization rules, although there are some restricted on deductibility of interest expense.

There are controlled foreign company rules that require Spanish entities to include in its taxable base any income obtained by a CFC where there are no material and personnel resources in the CFC. Passive income is usually subject to CFC rules even if there are material and personnel resources.

Tax credits and incentives – Spanish resident companies whose purpose is exclusively the holding and management of foreign companies’ shares (ETVE) may enjoy several tax exemptions from corporate tax and withholding tax, provided that profits are not distributed to a tax haven.

Real Estate Investment Trust (SOCIMI) listed companies may be exempted from corporate tax subject to certain conditions.

Collective Investment Institutions (SICAV) are subject to a reduced corporate tax rate of 1%, however dividends distributed are subject to the common withholding tax regime.

Venture Capital companies and funds may benefit from an advantageous tax regime, in which dividends may be exempted, capital gains may be 99% exempted (if shares have been held between 2 and 15 years), and profits distributions may be also tax exempt (unless distributed to a tax haven).

There are certain tax reliefs available for small and medium-sized companies, such as accelerated depreciation/amortization or more favourable bad debt provision treatment, subject to certain conditions.

There are tax credits available for R&D and technological innovation, film production and live performing arts activities.

Special Economic and Tax Regime of the Canary Islands

Companies registered in the Canary Islands are eligible for several tax benefits:

90% of annual undistributed profits can be allocated to a special investment reserve and not taxed but must be invested within 4 years.

Corporate income tax deductions are 80% higher than in the rest of the Spanish territory.

There is a 25% tax credit for investments in tangible fixed assets, subject to certain conditions.

There is a tax credit of 90% of corporate income tax for profits of shipping companies generated from ships registered in the Canary Islands, among other tax benefits.

A 15% tax credit for companies investing in certain African countries.

A 15% tax credit for advertising expenses.

In addition to be subject to IGIC (7%) instead of VAT (21%), certain transfers are exempted from IGIC.

Canary Islands Special Zone Tax Regime (ZEC)

Subject to the approval of the authorities, companies may be registered in the ZEC up to 31 December 2020 (applying the tax regime up to 31 December 2026).

Qualifying companies may be taxed at a 4% tax rate on a tax liability of EUR 1.8m (which can be increased by EUR 500,000 for each job created, and will apply to the full profits amount if more than 50 jobs are created). In addition, subject to certain conditions, dividends, capital gains and transfer of assets may be exempted from taxation.

To qualify, the company must:

  • Make an investment in fixed assets of at least EUR 100,000 in Gran Canaria or Tenerife, or EUR 50,000 in Fuerteventura, Lanzarote, La Palma, El Hierro, or La Gomera, within the first two years of their business activity.
  • Create at least 5 new jobs in Gran Canaria or Tenerife, or three in other islands.
  • Demonstrate a contribution to the economic and social development of the Canary Islands.
  • Have a registered office and place of effective management in the ZEC
  • Have at least 1 director residing in the Canary Islands.
  • Conduct a qualifying activity, which includes a wide range of industrial and commercial activities, most services and holdings.

Labor taxes – Employers are required to pay social security contributions at a fixed rate of 29.9% plus a variable rate for occupational accidents on employees’ gross salaries.

Employees are also required to pay social security contributions at a 6.35%.

The minimum monthly contribution base is of between EUR 858.60 and EUR 1,199.10, and the maximum monthly contribution base is EUR 3,751.20. Both employer and employee contribution must be withheld by the employer and paid to the Agencia Tributaria.

Personal income tax – A person is tax resident in Spain if he or she spends  more than 183 days in the country during a calendar year or have his or her centre of economic activities in Spain, if it is not stated otherwise in a tax treaty.

Tax-residents are subject to Personal Income Tax on their worldwide income.

PIT is levied at progressive rates by the state and each autonomous region. Lowest combined top marginal tax rate is 43.5% in Madrid (annual income exceeding EUR 60,000), and the highest is 48% in Catalonia (annual income exceeding EUR 175,000.20) and Andalusia (annual income exceeding EUR 120,000).

Savings income is taxed at progressive rates between 19% and 23%, savings income includes capital gains and investment income such as dividends and interests. Rental income is taxed at personal income tax general rates.

Non-residents are subject to Non-resident income tax at a flat rate of 24% on income from Spanish-source. If non-resident is a resident within the EEA that has concluded a tax exchange of information agreement, he or she will be subject to a reduced rate of 19%. Regarding dividends, capital gains and interests, they are subject to a 19% tax, unless tax rate is reduced under a tax treaty.

Other taxes – Municipalities levy a real property tax up to 1.3% on the cadastral value of the property. Transfer of real properties, which are not subject to V.A.T., may be taxed between 5% and 11% according to the autonomous region in which the transfer takes place. Transfers of securities may be exempt from both transfer tax and VAT, with some exceptions.

Inheritance and gift tax ranges from 7.65% to 34%, although it may be higher in some autonomous regions.

Net worth tax is levied at progressive rates between 0.2% to 2.5%, each autonomous region sets its own minimum amount exempt and its own scale rates. Madrid does not levy net worth tax.

The V.A.T. standard rate is 21%. Certain goods and services are taxed at 10%, 4%, 0% or exempt.

  • Offshore Income Tax Exemption
  • Offshore capital gains tax exemption
  • Offshore dividends tax exemption
  • CFC Rules
  • Thin Capitalisation Rules
  • Patent Box
  • Tax Incentives & Credits
  • Property Tax
  • Wealth tax
  • Estate inheritance tax
  • Transfer tax
  • Capital duties
  • 25% Offshore Income Tax Rate
  • 25% Corporate Tax Rate
  • 25% Capital Gains Tax Rate
  • 25% Dividends Received
  • 19% Dividends Withholding Tax Rate
  • 19% Interests Withholding Tax Rate
  • 24% Royalties Withholding Tax Rate
  • 0 Losses carryback (years)
  • Indefinitely Losses carryforward (years)
  • FIFOAverage cost Inventory methods permitted
  • 152 Tax time (hours)
  • 9 Tax payments per year
  • 6.35% Social Security Employee
  • 29.9% Social Security Employer
  • 48% Personal Income Tax Rate
  • 21% VAT Rate
  • 100 Tax Treaties

Country details

Spain
EUR
Madrid
Europe
e s - E S , c a , g l , e u , o c
46505963

The Kingdom of Spain is a transcontinental country, member of the European Union. It is located to the south of Western Europe as well as to the north of Africa. Its territory is organized in seventeen autonomous communities and two autonomous cities, with diverse geography and cultures. In Europe, it occupies most of the Iberian peninsula, known as peninsular Spain, and the archipelago of the Balearic Islands (in the western Mediterranean sea), and two autonomous cities (Ceuta, Melilla) and an autonomous region (Canary Islands) in Africa. The peninsular territory shares land borders with France and Andorra to the north, Portugal to the west and the British territory of Gibraltar to the south. In its African territories, it shares land and sea borders with Morocco.

It is inhabited by 46 million people. Its capital and most populated city is Madrid, with over 3.1 million inhabitants. Other important cities include Barcelona (1.6 m), Valencia (800,000) and Sevilla (700,000). Its official language is Spanish, along with four co-official regional languages, Catalan/Valencian, Basque, Galician and Aranese. Its official currency is the Euro (EUR).

The Spanish economy is the thirteenth largest worldwide by nominal GDP and the sixteenth by Purchasing Power Parity. Its main economic sector are services, with a large commerce sector and being a global tourist power and the third most visited country in the world, with 75.3 million tourists in 2016, and the second in income from tourism. The country has also a large financial sector, with two Spanish banks among the top thirty worldwide by market capitalization.

Regarding primary sector, its main crops are of wheat, barley, sugar beet, corn, potatoes, rye, oats, rice, tomatoes and onions. The country also has extensive vineyards and orchards of citrus and olive trees, being a large producer of oranges, wine and olive oil. Its main livestock is porcine, sheep and cow. Fishing also has a relative importance with sardines, hake and whiting, cod, anchovy, tuna, shrimp, squid, octopus and mussel.

Its main industrial sectors are textiles, steelworks, motor vehicles, chemical products, petroleum refining, cement, food, beverages and transport material, with special importance of the automotive and the aeronautical industries. The energy sector is highly dependent on imports, although Spain is world leader in wind power.

Tax treaties

Country Type Date Signed
Cyprus DTC  2013-02-14
Romania DTC  1979-05-24
Korea, Republic of DTC  1994-01-17
Dominican Republic DTC  2011-11-16
Greece DTC  2000-12-04
Ukraine DTC  1985-03-01
Belgium DTC  1995-06-14
Russian Federation DTC  1998-12-16
Turkey DTC  2002-07-05
United Kingdom DTC  2013-03-14
Iceland DTC  2002-01-22
United Arab Emirates DTC  2006-02-04
Czech Republic DTC  1980-05-08
Brazil DTC  1974-11-14
Belarus DTC  1985-03-01
Poland DTC  1979-11-15
Trinidad and Tobago DTC  2009-03-09
Sweden DTC  1976-06-16
Luxembourg DTC  1986-06-03
Croatia DTC  2005-05-19
Turkmenistan DTC  1985-03-01
Former Yugoslav Republic of Macedonia DTC  2005-06-20
Barbados DTC  2010-12-01
Malta DTC  2005-11-08
Pakistan DTC  2010-01-01
Philippines DTC  1989-03-14
Australia DTC  1992-03-24
Curaçao TIEA 2008-06-10
Kazakhstan DTC  2009-02-07
Aruba TIEA 2008-11-24
Hungary DTC  1984-07-09
Bahamas, The TIEA 2010-03-11
Ireland DTC  1994-02-10
Malaysia DTC  2006-05-24
Bolivia DTC  1997-06-30
Mexico DTC  1992-07-24
El Salvador DTC  2008-07-07
Bosnia and Herzegovina DTC  2008-02-05
San Marino TIEA 2010-09-06
Portugal DTC  1993-10-26
Israel DTC  1999-11-30
Timor-Leste DTC  1995-05-30
Panama DTC  2010-10-07
Italy DTC  1977-09-08
Senegal DTC  2006-12-05
Denmark TIEA 2009-11-12
Andorra TIEA 2010-01-14
China DTC  1990-11-22
Indonesia DTC  1995-05-30
Jamaica DTC  2008-07-08
Netherlands DTC  1971-06-16
Finland DTC  1967-11-15
Sint Maarten TIEA 2008-06-10
Chile DTC  2003-07-07
Georgia DTC  2010-06-07
Moldova, Republic of DTC  2007-10-08
Uruguay DTC  2009-10-09
Venezuela DTC  2003-08-04
Morocco DTC  1978-07-10
Tajikistan DTC  1985-03-01
New Zealand DTC  2005-07-28
Algeria DTC  2002-10-07
Hong Kong, China DTC  2011-04-01
Cuba DTC  1999-02-03
Egypt DTC  2005-06-10
Azerbaijan TIEA 2009-11-12
Canada DTC  1976-11-23
Thailand DTC  1997-10-14
Armenia DTC  2010-12-16
South Africa DTC  2006-06-23
Iran DTC  2003-07-19
Costa Rica DTC  2004-05-04
Saudi Arabia DTC  2007-06-19
Lithuania DTC  2003-07-22
Colombia DTC  2005-03-31
Ecuador DTC  1991-05-20
Estonia DTC  2003-09-03
Serbia DTC  2009-03-09
India DTC  1993-02-08
Argentina DTC  2013-03-11
Austria DTC  1966-12-20
Slovakia DTC  1980-05-08
Nigeria DTC  2009-06-23
Slovenia DTC  2001-05-23
Tunisia DTC  1982-07-02
Kyrgyzstan DTC  1985-03-01
Norway DTC  1999-10-06
Latvia DTC  2003-09-04
Kuwait DTC  2008-05-26
Japan DTC  1974-02-13
United States DTC  1990-02-22
Albania DTC  2010-07-02
Singapore DTC  2011-04-13
Uzbekistan DTC  2013-07-08
Bulgaria DTC  1990-03-06
France DTC  1995-10-10
Germany DTC  2011-02-03
Peru DTC  2006-04-06
Switzerland DTC  1966-04-26
Viet nam DTC  2005-07-03

Procedures

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