Spain: Tax system

Tax Rate For Foreign Companies

Resident companies, which are companies incorporated in Spain, registered in Spain or effectively managed in the country, are taxed on worldwide income and capital gains. Non-resident companies are taxed only on Spanish-source income and capital gains. For permanent establishments in Spain of foreign companies, non-resident income tax is chargeable on income that may be allocated to the permanent establishments at a 25% tax rate.
A branch remittance tax is set at a rate of 19% and applies to after-tax profits paid to a foreign head office, unless the head office is an EU resident or can benefit from a tax treaty and certain conditions are fulfilled.

Capital Gains Taxation

Capital gains are usually included in taxable income and are taxed at the standard rate of corporate income tax (25%). 95% of capital gains are exempt from tax if a participation of at least 5% in the subsidiary is held for a one-year period before the disposal of shares, resulting in an effective tax rate of 1.25%. Until 1 January 2021, the 5% requirement was deemed to be met if the participation in the subsidiary exceeded EUR 20 million, but this rule no longer applies. Nevertheless, in fiscal years 2021 through 2025, taxpayers with shareholdings acquired before 2021 that had an acquisition value of over EUR 20 million but that do not meet the shareholding percentage of 5% may continue to apply the full exemption for dividends and capital gains (provided that the general requirements are met).

Main Allowable Deductions and Tax Credits

Business expenses are generally deductible if incurred for the purpose of earning a profit, are properly recorded and documented, and provided that a particular deductibility restriction or limitation does not apply. Payments of real property tax and local surcharges on these taxes are deductible in determining the corporate tax base. All salaries, wages and bonuses paid are generally deductible, as well as severance pay (this last one up to a limit of EUR 1 million/employee). Donations are non-deductible expenses for corporate income tax purposes; however, a tax credit of up to 35% of the donation may be availed for donations to non-profit organisations that comply with certain requirements. Bad debts are deductible, provided certain conditions are met.
Net operating losses may be carried forward indefinitely (capped at 70% of taxable income obtained before the request to carry forward, 50% for taxpayers with a turnover between EUR 20 million and 60 million in the 12 months preceding the request, 25% for companies with a turnover over EUR 60 million in the 12 months preceding the request - no cap applies to companies with net operating losses below EUR 1 million). The carryback of losses is not allowed.

Tax incentives are provided for R&D (25%, or 42% if the expenses are higher than the average R&D expenses incurred by the company during the previous two years) and technological innovation of existing products (12% of the costs). An additional tax credit of 17% can be availed of for staff expenses incurred for staff exclusively carrying out and qualified to carry out R&D activities. Special tax treatment is also given to venture capital companies and funds.

Other Corporate Taxes

A 1% capital duty tax is levied on capital reductions and company dissolution, and is payable by the shareholders. Payroll tax, real property tax (with rates depending on the region and the property value) and stamp duty (0.5% for all notarized document, ranges from 0.75% to 1.5% for other transactions depending on the region and the type of transaction) also apply. A hydrocarbons tax relating to the exploration, research and exploitation of hydrocarbons is also in force.

A transfer tax, ranging from 5% to 11%, depending upon the region (6% on average), is generally levied on inter vivos transfers, including real estate transfers and real estate leases that are exempt from VAT. Transfers of shares generally are exempt from transfer tax. Companies resident in a tax haven for tax purposes that own real estate or hold real property rights in Spain are subject to a tax equal to 3% of the assessed value of the real estate.

The employer contributes 30.4% of the employee’s wages for social security (24.1% for common contingencies, 5.5% for unemployment, 0.2% for the salary guarantee fund, and 0.6% for professional training), plus a contribution for professional contingencies ranging between 1.5% and 7.15%, depending on the type of activity.

Other taxes include: real estate tax (levied annually by the local authorities), a local tax levied on the increase in the value of urban land (applied at the time of the sale of the urban real estate), a motor vehicle tax, waste collection fees.

Other Domestic Resources

Spanish Tax Agency

Country Comparison For Corporate Taxation

Source: The World Bank - Doing Business, Latest data available.

Accounting System

Accounting Standards

Financial statements must be prepared in accordance with IFRS Standards. Accounting in Spain is based on the General Accounting Plan (in full compliance with IFRS).

Accounting Regulation Bodies

ICAC, Institute of Accounting and Auditing

Accounting Law

Law 16/2007 of 5 July 2007 (and its partial modification by Law 34/2007 of 15 November 2007) reconstitutes and adapts the mercantile legislation related to accounting and modifies, among other things, the Commercial Law and the recasting of the text of the Limited Company (Listed Company or Public Limited Company) Law. The primary modifications concern the annual accounting reports, the evaluation criteria of certain items and the financial consolidation system.

Difference Between National and International Standards (IAS/IFRS)

IFRS Standards are required for all domestic public companies and listings by foreign companies (except in the case of a foreign company whose home jurisdiction’s standards are deemed by the EU to be equivalent to the IFRS Standards). IFRSs are not required for SMEs.

Accounting Practices

Tax Year

Calendar year, but can be otherwise established. Must not exceed 12 months.

Accounting Reports

The annual accounts consist of the balance sheet, income statement, (cuenta de perdidas y ganancias), statement of changes in net assets, cash flow statement and the schedule (memoria). Summary annual accounts can be used under certain conditions of amount and staff for the SME and micro-enterprises.

Under Spanish law, if two of the following requirements are met in two consecutive years, the company may avoid audit of its annual accounts: total assets are less than EUR 2.85 million; annual turnover is less than EUR 5.7 million; and the workforce comprises fewer than 50 employees.

Publication Requirements

The publication of accounts to regulatory authorities is annual and compulsory. The directors of a company have a three-month period after the close of the fiscal year to prepare the accounts.

Accountancy Profession

Accountants

The profession is highly developed due to the complexity of the law and the administrative paperwork.

The accountant (censor jurado de cuentas) certifies, verifies, assesses and organizes the company's accounting books and balance sheet.

Auditors are also numerous.

Professional Accountancy Bodies

ICJCE, Institute of Certified Public Accountants of Spain
AECE, Professional Association of Certified Public Accountants and Certified Tax Experts of Spain
AECA, Spanish Association of Company Accounting and Administration

Member of the International Federation of Accountants (IFAC)

Spain is an active member of the IFAC.

Member of Other Federation of Accountants

Spain is a member of the Federation of European Accountants (Accountancy Europe).

Audit Bodies

Companies have to seek a statutory auditor to conduct an annual audit of the financial health of their organisation. You can consult the Group of Public Auditors of Spain

Allowable Deductions and Tax Credits

Deductions are available for mandatory social security contributions, union fees (up to EUR 500), mandatory contributions to mutual benefit societies, and "other expenses" (capped at EUR 2,000, which may be higher for those working in a different town). Alimony paid to an ex-spouse in accordance with a court decision is deductible. Contributions to qualifying pension plans can be deducted up to a maximum of EUR 1,500 per year, capped at 30% of total individual net income from employment and business activities (the limit can be increased by EUR 8,500 when it comes from business contributions). Furthermore, individuals whose spouses obtain income from employment or business activities up to EUR 8,000 can deduct the contributions made to qualifying pension plans from their own taxable income on behalf of the spouse (capped at EUR 1,000/year).

Several allowances are provided by the law for individuals (EUR 5,550, raised to EUR 6,700 for those over 65s and to EUR 8,100 for those over 75s) and families (varying according to the composition of the family). A minimum family allowance for the disability of relatives in an ascending and descending line of EUR 3,000 for each relative or EUR 9,000 when the level of disability is 65% or more also applies. Click here to check the specific allowances that apply in different regions.

The expenses incurred to realise a business income can generally be deducted. Several reductions apply to the net business income.
Capital losses arising from transfers of assets are included in savings income and can only be offset against capital gains included in the savings income of the tax period.
For further information, visit the dedicated pages on the website of the Spanish Tax Authority.

Special Expatriate Tax Regime

Non-resident individuals are taxed at a flat rate of 24% on the gross amount of their income (i.e. no deductions or allowances are granted). For residents in other EU member states or European Economic Area (EEA) countries with which there is an effective exchange of tax information, the rate is 19%. Pensions are taxed at progressive rates between 8% and 40%. Capital gains, interest and dividends are taxed at 19%, royalties at 24%.
A foreign individual who is assigned to work and live in Spain may opt to be taxed as a non-resident for a six-year period.

The income tax is not levied on employment income obtained by tax-resident individuals if the work is effectively carried out outside Spain and if the work is carried out for a company, entity or permanent establishment which is not resident in Spain for tax purposes and a similar tax is levied in the country where the employee carries out the work (up to the limit of EUR 60,100).

Capital Tax Rate

For non-residents, capital gains generated from transfers of assets are taxed at a 19% rate.
A gift and inheritance tax is levied on the assets' net acquisition value with progressive rates (which may vary according to the region, generally between 7.65% and 34%).
A property tax is also levied. Rates can be fixed by each municipality, generally with a minimum of 0.4% (for urban properties) to a maximum of 1.3% (for special properties).
A special 20% tax is levied on certain prizes like rewards gained from lotteries and games arranged by the State Lottery and Gaming Corporation, regional bodies or entities, contests held by the Spanish Red Cross, and the specific types of games authorized to be conducted by the Spanish Organisation for the Blind; or profits earned from lotteries, games, and contests conducted by public bodies or entities engaged in social or welfare non-profit-making activities in other member countries of the European Union that share the same business objectives as the bodies or entities mentioned above. The tax-exempt net amount for lotteries and games is EUR 40,000.

For 2023, employees' social security contribution amount to 6.45% of the salary (4.80% for common contingencies, 1.55% for unemployment, and 0.10% for professional training), with a maximum contribution base of EUR 4,495.50 per month.