One of the certainties of life—and business—is paying taxes. Businesses in Spain, whether domestically or foreign owned, have this responsibility just like everyone else. The types business tax in Spain you will have to pay depends on how your company is set up, how new the company is, whether it is making a taxable profit, and the type of business activity being carried out. Note that rules and requirements can vary substantially from region to region, so having the assistance of a lawyer specializing in business tax in Spain can offer great peace of mind.
Business tax in Spain: corporation tax rate and deadlines
The general Spain corporate tax rate, known in Spanish as “Impuesto de Sociedades”, is set at 25%. For companies that are resident in Spain, this applies to income earned in any country, whereas it applies only to income earned in Spain for nonresident companies. Also, for newly formed businesses, there is a reduced corporation tax rate in Spain of 15%, which is valid for the first year the business reports a taxable profit and the following tax period. This corporation tax does not extend to self-employed people, known in Spanish as “Autónomos”, because they report their business income on their personal tax return each year.
Your corporation tax statements and payments must be received by the tax authorities within a period of 6 months and 25 days, maximum, counted from the end of your company’s fiscal year. The Spanish tax year corresponds to the natural year, but for business tax purposes, you will go by the company’s fiscal year provided it does not exceed 12 months. You should also ask your lawyers to determine whether you will be expected to pay advance tax installments (three annually, typically 18% of the last advance tax payment, no later than April 20, October 20 and December 20, respectively). The remainder of outstanding taxes due will be paid when the annual corporate tax return is filed at the end of the company’s fiscal year.
Business tax in Spain: business activity tax
A separate, local tax that certain companies are responsible for paying is called “Impuesto de Actividades Económicas”, or IAE for short. This is a tax on business activity, but the only businesses with this tax liability are those whose annual income exceeds €1 million. Still, all businesses are required to register for this tax, either through your municipal or provincial government depending on the population of your town.
Business tax in Spain: paying VAT tax
The value added tax or VAT (“Impuesto Sobre el Valor Añadido” or IVA in Spanish) is technically a tax on your customers, not on your business, but it merits mention in this post because it is your responsibility to play middleman and pass this tax money on to Spain’s tax agency, “Agencia Tributaria”. The IVA tax rate ranges from 4% to 21% depending on the type of product or service your business provides. As a company, you are required to file a VAT/IVA statement each quarter.