One of the main taxes to be paid by local as well as foreign investors that establish businesses within Spain is the corporate tax which is imposed at a national level. There are also lesser substantial taxes imposed by local councils in the country.
Therefore, entrepreneurs from abroad must be aware of the rules of both levels of taxation, both at the federal level and at the regional level.
If you are here it’s because you are thinking about starting your own business in Spain and want to know your tax obligations in depth or perhaps you already have one in place and would like to make sure you maximize your tax returns.
Well, in this article we will be providing you with details regarding all the possible business taxes in Spain that are imposed on a corporation. Without any further delay, let’s understand the corporate taxes in Spain.
What is all about Corporate taxes in Spain?
The Spain corporate taxes are imposed on businesses that operate in Spain on the profit they earn. Eventually, it is the equivalent of the tax on income that is paid by self-employed people or employees, apparently, it is for firms or legal entities.
The corporate tax rate in Spain has been specifically designed for firms or businesses that are residents of Spain. If non-residents are involved the tax rate will be calculated at an alternative rate.
The standard corporate tax rate in Spain is 25%. Newly established businesses are subject to a 15% tax rate for both the first tax period in which they make a profit and the subsequent tax period.
Who is responsible for paying Spain Corporate Taxes?
1. Spain Corporate tax rate on residents
If you are you are a Spanish citizen, you are required to file the Spain corporate tax rate and be paid Spanish taxes on your income from all over the world in the following situations:
- Your income per year from work is greater than EUR22,000.
- If you’re working for yourself and live in Spain or you run your own company.
- You can earn rental income that is more than $1000 per year.
- You can earn capital gains as well as savings income of over 1600 EUR per year.
- It’s your first year declaring residency tax-free in Spain.
Additionally, you need to declare all assets in foreign countries with a value of more than the amount of EUR50,000. The tax-deductible income is the amount left without deductions to pay for the social insurance system in Spain’s retirement, allowance for personal and professional expenses. The corporate tax rate in Spain can be progressive.
2. Spain Corporate Tax Rate for non-residents
If you reside within Spain for less than 6 months during an entire calendar year, then you are considered a non-resident. You only have to pay taxes on income earned from business taxes in Spain. Taxes are applied to your income at a flat rate, with no exemptions, or deducts.
If you’re a non-resident and have a residence in Spain regardless of whether or not you lease it out, you’ll be required to file taxes to be responsible for Spanish properties taxes to non-residents (or imputed tax on income from your property) and taxes on local Spanish tax on property.
3. Double taxation agreements
Spain has signed several agreements with other nations to prevent double taxation. The Spanish tax authority maintains an up-to-date list of treaties.
4. Taxation on income in Spain
Spanish taxes on income are divided between the regions and the state. The 17 regions of autonomous Spain have the power to decide on their tax rates and obligations.
Therefore, even though the state is reducing taxes as well as simplifying tax bands, the tax system across Spain remains a complex system.
Various capital gains on business taxes in Spain
The capital gains on business taxes in Spain (the tax on profits made from selling properties or other investments) are as follows:
- The first Euro 6,000: 19%
- EUR6,000-EUR50,000: 21%
- EUR50,000-EUR200,000: 23%
- More than EUR200,000: 26%
If you purchased a home before 1994, you could be required to pay more tax than you did before since the capital gains tax taper tax has been eliminated. It is possible that you are qualified for the exemption if you are older than 65 and selling your primary residence or younger than 65 and selling your home to purchase a second residence in Spain.
VAT in Spain
Spain is home to three different levels of tax on value (VAT).
- The general VAT rate is 21% of products and services
- The reduced VAT rate is 10% on road tolls and amateur sports events, fairs, and health products, as well as food items that are not essential, garbage collection as well as pest control.
- The super reduced VAT rate is 4% off the most essential food items, medicines books, and newspapers
Benefits of corporate taxes in Spain
- The primary benefit of corporate taxes is it isn’t progressive. This means that in difference to the taxes paid by self-employed people when it comes to the case of corporations, there is a traditional rate that doesn’t change as the growth in turnover.
- If you are planning you will earn over 60,000 euros in a year, don’t hesitate and begin immediately with the business path.
- However, there are some expenditures and investments you can take deductions for which is what makes this a good option.
Conclusion
Spain’s corporate tax rate applies to businesses as well as other organizations that reside in Spain that are taxed on income globally.
A company is considered to be resident in Spain to the tax point when it was established under Spanish laws, has its registered office, or has its managing office in Spain. Spain’s corporate tax rate offers a variety of incentives to invest specifically in R&D and technological advancement.
If you are looking to open a business in Spain then you must be aware of all the distinct corporate taxes in Spain imposed on businesses. However, it is recommended to seek assistance from a professional expert from OnDemand International, they will assist in all the possible manner.
