TAXES IN SPAIN

The Spanish tax system is modern and competitive. Within the framework of economic globalization, the Spanish tax system has undergone a series of reforms designed to increase the competitive advantage of foreign companies that open for business Spain.

These are only general guidelines. We strongly advice to contact professional lawyers, or “gestor” if there are any questions regarding legal matters.

Business Tax:

Corporate Income Tax (Impuesto de Sociedades)
It is a direct tax on corporate profits obtained within the taxation period.
Tax period can not exceed 12 months.

Spain’s Standard corporate income tax rate is 35%. Some types of companies such as foundations, cooperatives, associations and Investment Founds may pay reduced rate of 30%.

The special tax regime is applicable to small and medium sized companies which net turnover does not exceed 1,502,530€.

Non-resident companies are those without permanent presence in Spain. These are subject to a 25% withholding tax on income obtained in Spain (35% for capital gains tax).

VAT (Impuesto sobre el valor añadido - IVA)
IVA is an indirect and general consumer tax assessed on the value added to goods and services.

The IVA is not applicable in the The Canary Islands, Ceuta and Melilla, where another tax, the IGIP, is applicable.

The standard rate is 16%.

Reduced rate of 7% is applicable for example on:
Substances or products used for human or animal consumption, seeds, medical equipment such as glasses and lenses, flowers, plants, gas, transport, accommodation – hotels, tickets to museums, theatre,  etc.

Reduced rate of 4% is applicable for goods and services considered as basic necessities (bread, milk, cheeses, eggs, fruits, books, newspapers, magazines, medicines, prosthesis, cars and wheelchairs for handicap etc.)

If you are a tourist from outside the EU, you can claim for a refund of IVA paid on any items of 90.00€ and over.  This procedure can be done at he airport before you leave Spain by showing your special form filled in and your receipts (forms are available in most shops).  There is no limit to the amount of IVA to be refunded.

Business Activity Tax (IAE):
As of 2003 this tax is waived for businesses that have a profit of under one million euros. This is an annual tax paid by businesses operating in the municipality. This tax rate depends on many factors, such as size and location of the business, the type and number of employees.

Personal Taxes:

Personal Income Tax (Impuesto sobre la renta de las personas físicas IRPF)
Filing period: May 1 – June 20 (if the contributors must pay) June 30 (if contributors are entitled to tax refund)

The individual’s income may derive either of a dependent work or obtained by means of self-employment, development of a business or professional activities.

The taxable income is determined as the difference between the income earned and the expenses that are deductible according to Spanish Law.

At the moment, only those individuals earning more than 21,035.42€ a year in Spain, are obliged to make the income tax declaration, earning above this amount carry a progressive tax structure.

Non-residents Income Tax (IRNR)
Most non-residents are required to file income tax because they own a property, deposit money with a Spanish bank, though you may also have to file because a Spanish company has paid you dividends, or because you worked for a few months during the year in Spain, etc.

Income tax declarations shall be filed to the Tax Office of the contributor’s address.

Employers must provide employees with a certificate of taxes withheld (Certificado de Retenciones) in order that they can subtract them to calculate their tax obligation.

Wealth Tax (Impuesto Sobre el Patrimonio)
Filing period: January 1 – June 30 of the following year.

Resident individuals pay wealth tax on their worldwide assets at the end of each year. Non-residents are taxable on property situated in Spain. However, tax treaties may affect the application of this rule. The wealth tax applies only to assets with a value above 170,000€. The tax rate starts at 0.2% and rises to 2.5% for estates with a value above 10,700,000€.

Inheritance and Gift Tax
This tax applies to the beneficiaries of the inheritance or gift.

Inheritance tax is the tax payable on the increase of wealth, obtained by reason of death.

The gift tax is levied on the increase of wealth, produced by reason of gift while the transferor is still living.

Foreign people (non-residents) shall pay the inheritance tax in Spain only for those assets situated in Spain.

The tax should be paid by the beneficiaries and always before the beneficiary can deal with the deceased’s assets.

It is complicated to calculate the tax; different percentages shall be charge according to a sliding scale, where different circumstances shall be considered.

The tax rates may differ from one Spanish region to another, some Spanish communities such as Catalonia, Balearic Islands, Aragón, Basque Country and Navarra provide different tax regimes.

Property taxes:

Property Tax (Impuesto de Bienes Inmuebles - IBI)

Each year the municipality issues a property tax payment slip for all properties.
This tax is based on the property’s cadastral value (valor catastral), which can be found on those payment slips.

The property tax is calculated by reference to the official value of the property (valor catastral) registered in respect of all properties in Spain, it will also be determined by other circumstances such as location, size, nature of the land.

Property Transfer, corporate transactions and Stamp Duty Tax (Impuesto de Transmisiones Patrimoniales y Actos Jurídicos Documentados –ITP / AJD)

• Property transfers: this tax must be paid upon purchase of estate from a private individual.

The transferee shall pay the tax at a rate of 6% of the purchasing price (for Estate), or 4% in case of purchase of movable or personal property, or 1% of the real value of the right set up.

• Corporate transactions: i.e. setting up a business, business merger, share capital increase or decrease etc.

The corporate shall pay this tax, except when increasing or decreasing share capital, in which case the shareholders must pay this tax.

The tax rate will be 0.5% of the capital increase, share capital of the newly society…

• Stamp duty: The tax shall be paid upon signature of a public deed, of notarial documents, registry office documents. The rate applicable differs from one case to another

The tax shall be paid at the Treasury Office (Delegación de Hacienda) within 30 working days from the moment of signing the deed or the contract.

Capital Gains Tax (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana – Plusvalía)
It is the Spanish municipal tax on the increase in the value of the urban land since the last recorded transfer (sale, inheritance, donation…), not in the building erected upon it.

This tax is borne by the transferor, but usually both parties agree the buyer pays it.