Taxes in Spain, Taxation in Spain, Taxes system in Spain
Spain personal Income Tax (IRPF)
Personal income tax rates in Spain are progressive to 43%.
Income Band (EUR) Tax Rate
0 - 17,707 24%
17,707 - 33,007 28%
33,007 - 53,407 37%
53,407 + 43%
The tax rate for savings income increases is 19% for the first EUR 6,000 and 21% on the excess.
When the earned income is less than EUR 22,000, the individual is not obliged to prepare a tax return. If there is more than one individual in the same family unit, the limit is EUR 8,000.
Resident individuals were subject to net wealth tax in respect of their worldwide assets. From 1 January 2008 net wealth tax has been abolished.
Inheritance tax is also levied on the recipient of property passing by way of gift or death. The tax rates are chargeable from a minimum of 7.65% on assets worth up to EUR 7,993.46 and at a maximum of 34%. This rate applies to the excess of value transferred above EUR 797,555.08. The rate is determined by reference to the total value of assets gifted to each beneficiary.
65 and over 6.069
75 and over 7.191
Grade 33-65 2.316
Grade 65-100 7.038
Add if 3rd party care required 2.270
Additional allowances for children (less than 25, living in and income less than 8.000):
One child 1.836
Two children 2.040
Three children 3.672
Four or more children 4.182
Add for child under 3 2.244
Additional allowances for mother or father living in (conditional on their income being less than 8.000):
Over 65s 918
Over 75s 1.122
Earned income allowance (includes pension income)
Earnings up to 9.180 4.080
Earnings over 13.260 2.652
(sliding scale applies for income between the two limits)
Dividends receivable tax free 1.500
Allowable levels of income before a declaration must be made:
Earned income already subject to employer deductions 22.000
(and other income less than 1.500)
Reduced limit if earned from more than one employer 11.200
Bank interest and other investment income 1.600
Individual residents are liable to IRPF in respect of their world-wide income.
Non-residents are liable to IRPF only on their Spanish sourced income.
An individual is deemed to be resident for tax purposes if:
(i) he stays in Spain for more than 183 days in any calendar year
(ii) his centre of vital interests is in Spain
(iii) his spouse and minor dependent children qualify as residents of Spain.
Fringe benefits in cash or kind constitute employment income.
Ordinary gains and losses are treated as ordinary income.
All businessmen and self-employed professionals are required to file quarterly returns and make advance payments by 20 April, 20 July and 20 October of the current year and 30 January of the next year on account of final income tax liability for the current year.
All resident employees and self-employed individuals must register and pay monthly contributions to the Spanish social security system. The rate of the employee's general social security contributions is 6.35% and the employer's contribution is 30.15%.
Spain Corporate Tax (Impuesto de Sociedades)
Standard rate of corporation tax in Spain is 30%.
From 1 January 2010, there is a special reduced tax rate (20% on the first EUR 120,202.41 of taxable income) for small companies with fewer than 25 employees and revenue below EUR 5 million which maintain or create jobs.
Special tax rates are chargeable on portfolio investment funds (1%), on mutual insurance societies (25%), on co-operatives (except for capital gains) (20%), on non-profit institutions (10%) and on small companies.
Spanish resident companies are liable to corporation tax on all sources of income and capital gains, wherever arising. A company is treated as resident in Spain if it is incorporated in Spain has its registered office in Spain or its effective management is in Spain.
A non-resident company is taxed on income and gains of a branch carrying on a trade in Spain.
The Spanish tax year is the calendar year.
Corporation tax is due for payment on 25 July following the end of the tax year (when the company has a year end of 31 December). The tax return must be filed by the same date.
There are two systems:
1. Payments are calculated as 18% of the previous year's tax liability. General rate is 18%. The payments are due on 20 April, 20 October and 20 December.
2. Payments are based on the forecasted taxable income of the period as follows. General rate is 21%. Three payments due on:
. 20 April: Taxable income of the period January-March
. 20 October: Taxable income of the period January-September less advance payment of 20 April
. 20 December: Taxable income of the period January-November less advance payment of 20 October.
The second system is mandatory for Companies whose annual turnover is more than EUR 6,010,000.
Capital gains are taxed as ordinary income. Foreign-sourced capital gains are fully liable to Spanish corporate income tax with a credit for any foreign taxes payable, although such gains can be exempt under the terms of a double tax treaty. Capital losses may be offset against capital gains or carried forward for 15 years for offset
against future capital gains.
From 1 January 2010 the tax rate for capital gains is 19% for the first EUR 6,000 and 21% for the remaining amount.
BRANCH PROFITS TAX
Foreign branch profits of a Spanish company will be liable to Spanish tax.
FRINGE BENEFITS TAX (FBT)
There is no fringe benefits tax in Spain.
The main local taxes comprise: trade licence, opening licence for each business premise, publicity licence, traffic licence, construction licence and land rates.
A 1% transfer tax applies to the value of contributions, in cash or in kind, to the share capital of a company.
The transfer of real estate is generally subject to VAT at 18% from 1 July 2010. This is reduced to 8% for private residential property. If the transferor is not within the VAT system, transfer tax at 6% is applicable. Transfer tax is also payable on the transfer of movable property. The rate is 4% of the value.
DETERMINATION OF TAXABLE INCOME
Trading profits are calculated for tax purposes in accordance with financial accounts but adjusted for the main items as follows:
Depreciation can be deducted on a straight-line basis, reducing-balance basis in the case of new tangible assets with a life of more than three years or on an individual basis (if approved by the tax authorities).
The Ministry of Finance issues guidelines as to the maximum straight-line rates as follows:
Motor vehicles: 16%
Office equipment: 10%
Industrial buildings and hotels: 3%
Office and shop buildings: 2%
Air conditioning and central heating: 12%
Computer equipment: 25%
Land cannot be depreciated.
Stock and work in progress are valued at the lower of cost or market value; FIFO and average cost methods are acceptable.
CAPITAL GAINS AND LOSSES
As discussed above, capital gains and losses are included in the trading income. Tax on gains realised from the disposal of tangible assets, intangible assets and investments are charged at a reduced rate of 19% for the first EUR 6,000 and 21% for the remaining amount if the full proceeds are reinvested into assets of a similar type. The reinvestment must take place within three years after a disposal or one year before a disposal.
Dividends paid are subject to a 19% withholding tax at source (tax rate for capital gains is 19% for the first EUR 6,000 and 21% for the remainder) whether they are paid to residents or non-residents. The withholding tax rate may be reduced under the relevant double tax treaties. Dividends received from Spanish companies are not subject to withholding tax at source if the holding is more than 5% and has been held for more than 12 months. This may be credited against the recipient company's corporate income tax liability.
A Spanish company receiving a dividend from another Spanish company whose share participation is lower than 5% of the capital is subject to tax on 50% of the dividend. A Spanish portfolio investment company or a parent which has held more than 5% of the share capital is exempt from tax on dividends received from other Spanish companies.
Interest is normally deductible on an accruals basis. Interest paid to foreign lenders requires Ministry of Commerce approval. Withholding tax of 19% is generally deductible from interest paid, although this is normally reduced or eliminated by a double tax treaty.
Spanish resident companies financed by affiliated non-residents (except CEE) have not been able to obtain a full interest deduction if the debt/equity ratio exceeded 3:1. The excess is treated as a dividend. However, this may be overridden by nondiscrimination articles.
Losses may be carried forward against all income within the next 15 accounting periods. Losses may not be carried backwards. The carry forward of losses is not normally restricted by a change in the ownership of a company's shares.
FOREIGN SOURCED INCOME
Under the International Fiscal Transparency regime, Spanish resident companies can be subject to tax on profits earned by certain non-EU resident subsidiaries in which they have more than a 50% interest. These rules apply to passive income earned by the subsidiary and taxed at a rate less than 75% than that which it would have been subjected to if earned by the Spanish resident company.
A credit against tax payable may be taken for 25% of research and development expenses. Where the expenses exceed the average amount incurred in the preceding two years, a credit equal to 42% is available on the amount exceeding the average amount; 3% of investment export activity; 1% - 2% of professional training; and 8% of technological innovation of existing products. The majority of these incentives will be reduced in future exercises, finally expiring in 2014.
Industrial development banks and companies and venture capital companies and funds are subject to special tax regimes.
FOREIGN TAX RELIEF
Foreign taxes may be credited against Spanish Corporation Tax, whether or not a tax treaty exists with the foreign country. There is no system of global foreign tax credited. Under certain circumstances, profits arising in permanent establishments of Spanish companies may be exempt from Spanish tax if they have suffered a similar tax overseas. Foreign tax credits are not available for the underlying taxes which the foreign company pays on the profits.
Permission may be obtained from the tax authorities to consolidate the results of a group of companies for corporate income tax purposes. The group must be headed by a Spanish resident company which directly or indirectly owns more than 75% of its subsidiaries. All subsidiaries must be Spanish resident companies. The result of consolidation is that all income, gains and losses of the group are brought together for tax purposes.
RELATED PARTY TRANSACTIONS
For tax purposes, transactions between related companies will be treated as if they had been made at arm's length prices.
Withholding taxes paid to Spanish resident companies must generally be deducted from dividends and interest at 19% and from royalties at 24%. A 10% rate applies to royalties paid to associated EU resident companies until 2011, when a full exemption comes into force in line with the EC Interest and Royalties Directive.
There are also withholding taxes payable on technical assistance fees and management fees payable to non-residents. All types of interest paid to EU resident companies (excluding Cyprus and Luxembourg holding companies) are exempt.
In principle, all direct investments into Spain require previous verification by the Direcciσn General de Transacciones Exteriores (DGTE). Outward direct investments also require approval by the DGTE.
Spain vat - Value Added Tax (IVA)
The standard VAT rate in Spain is 18% from 1 July 2010.
There is a reduced rate of 8% and a super-reduced rate of 4% on certain goods and services such as food, animal foodstuffs, domestic dwellings, transport, accommodation and films.
- Standard VAT rate (Tipo General): 18%
- Reduced VAT rate (Tipo Reducido): 8%
- Super-reduced VAT rate (Tipo Superreducido): 4%
A zero rate exists for exports and international services provided to non-EU countries.
VAT is levied on the supply of taxable goods and services.
Registration Registration is mandatory for all taxpayers that carry out transactions in Spain.
Filing and VAT payment Filing and payment are due on a monthly basis where the turnover in the previous period exceeds approx EUR 6 million; otherwise, quarterly filing and payment are required.