INTERES Invest in Spain

1. When is corporation tax applied and what are the rates and allowances?
2. How may VAT affect my business if I set up in Spain?
3. What are the main taxes that apply to businesses in Spain?

1. When is corporation tax applied and what are the rates and allowances?

A business has to pay corporation tax in Spain when it is “resident” for tax purposes, which occurs in the following cases:

1) When it has been formed in accordance with Spanish law

2) When it has its registered office in Spain

3) When it has its effective management seat in Spain

In the event of a conflict of residence, the provisions of the double taxation treaties signed by Spain with other countries will be applied.

The general rate of tax is 35%, with small and medium-size enterprises (SMEs) paying 30%. From 2007 until 2010 the standard rate will be reduced to 30% and the rate for SMEs will be 25%.

The main allowances against the corporation tax liability are: for reinvestment of extraordinary profits, for investments to protect the environment, for investments in research and development and technological innovation and for investments in professional training, amongst others.

Although the rate of tax is higher than in some European companies, the tax allowances under the Spanish tax system place Spain five points below the European average in terms of the tax burden, as can be seen from the attached table:

TAX BURDEN, UNDERLYING TAX RATE 2003 TOTAL TAXES AS % OF GDP UNDERLYING TAX RATE: CONSUMER EMPLOYMENT CAPITAL FRANCE 43.8 21.4 43.3 35.9 ITALY 42.9 17.0 41.8 31.1 BELGIUM 45.7 21.5 43.2 29.5 GERMANY 40.3 18.5 40.6 30.1 SPAIN 35.6 16.5 29.8 30.3 PORTUGAL 37.0 20.0 33.7 32.6 POLAND 35.8 : : : CZECH REP. 36.2 20.5 40.1 27.0 GREECE 36.2 17.9 40.9 17.0 HUNGARY 39.1 28.5 39.2 :

Source: European Commission
Underlying tax rate: measures the effective tax burden

For more information about Taxes click here.

 

top

2. How may VAT affect my business if I set up in Spain?

VAT is only a cost to the end consumer, it does not involve a cost for businesses or professionals as it gives them the right to deduct tax paid from tax charged. The following activities are chargeable to VAT:
1) Deliveries of goods
2) Intra-community acquisitions of goods
3) Import of goods
4) Provision of services

The general rate is 16%, which is applicable to most deliveries of goods and provisions of services. However, there is a reduced rate of 7%.

For more information about VAT click here.

top

3. What are the main taxes that apply to businesses in Spain?

Corporation tax [impuesto de sociedades] and value added tax [impuesto sobre el valor añadido – IVA].

top

Print Version