According to Spanish law any company incorporated in Spain, with a registered office in Spain or its effective management in Spain, is resident in Spain and subject to Spanish tax. Resident companies are charged corporation tax on worldwide profits and capital gains. Non-resident companies are taxed on their Spanish-source income and gains, according to the guidelines of the relevant tax treaty. Branches are generally taxed in a similar way to subsidiaries.
What is the taxable income?
The taxable income is the amount left over when deductible expenses are subtracted from the profits, based on the balance sheets of the company. Some expenses are not considered deductible for tax purposes (e.g. penalties, certain provisions and gifts). For taxable years 2020, the depreciation rates applicable to tangible assets are limited to 70% of the maximum rates provided by law for corporate taxpayers with a turnover exceeding €10 million.
What are the tax rates applicable to 2020?
The full rate of corporate tax in Spain is 30%. For small and medium sized companies (companies with a turnover below €10 million in the previous year) there is a reduced rate:
- Small companies (between 1 and 24 employees): 20% for profits up to €300,000 and 25% for those with profits over that threshold.
- Medium-sized companies: 25% for profits up to €300,000 and 30% for companies with profits over that threshold.
Operating losses may be carried forward for up to 18 years, starting from the first period in which profits are earned. The carry back of losses is not permitted. For tax periods from 2001 to 2015, limitations apply on the use of the net operating losses if it is a big company.
What are the allowances and deductions in Spain?
Deductions are available for investments in the environment, double tax relief on dividends (subject to certain requirements), double tax relief for capital gains derived from the transfer of shares (under certain circumstances) and extraordinary profits reinvestment.
Capital gains derived from a holding non-resident company are exempt if there is a treaty for double taxation that includes an exchange of information clause with that country or if the paying entity is subject to a tax equivalent to the Spanish corporate income tax (subject to certain requirements).
The tax year coincides with the accounting period. The tax period must not exceed 12 months.
When is corporation tax due?
The corporate tax must be filed and taxes paid within six months and 25 days of the close of the fiscal year. Corporations are required to make three advance payments of income tax in April, October and December of each year.
Other Taxes on Corporations
Payroll tax – Withholding tax on income from employment is applicable on payroll (i.e. in relation to personal income tax).
Social security – Read our article Employment, Payroll and Dismissal for more information.
Council tax – Read our article Council Tax in Spain for more information.
VAT – Read our article Spanish VAT (IVA) for more information.
Capital duty – A 1% capital duty applies to the reduction of capital gain and upon liquidation. However, the setting up of companies and the increase of share capital are not subject to capital duty.
I have an inactive company, do I have to declare?
Yes, the declaration must be made even if the company is inactive.