Taxes in Spain

The main direct taxes applicable in Spain are:

Corporate Tax (IS)
Personal Income Tax (IRPF)
Non-resident Income Tax (IRNR)

The most relevant indirect taxes applicable in Spain are:

Value Added Tax (IVA)
Transfer and Stamp Tax (ITP and AJD)

Spain also has 99 agreements to avoid double taxation, with broadest reach in Latin American countries.

Tax rates by agreement

Corporate

Tax

Corporate Tax (IS) applies to companies and other entities that are tax residents in Spain and are taxed on their income worldwide. A company is considered resident in Spain for tax purposes if it has been formed under Spanish law, has its registered office or its effective management office in Spain.

In Spain, the general corporate tax rate is 25%.
Corporate Tax includes different tax incentives for investing, particularly in R&D and technological innovation. There are also tax credits to avoid domestic and international double taxation and an exemption system for dividends and capital gains from foreign sources.
Accountable expenses are deductible, with some exceptions. Non-deductible expenses include dividends, gratuities and fines or sanctions.
Amortization of fixed assets is a tax-deductible expense as long as it is effective and accountable.
Capital gains, income derived from the transfer of assets, is considered income and taxed at the rate applied to other income.
If the resulting tax base is positive, it can be offset by negative tax bases from previous tax periods.

Practical examples of Corporate Tax payment

Tax regime for groups of companies

Groups of companies can be taxed under a special consolidated tax regime, where all the companies in the group are jointly taxed, not individually.

Other specific incentives and special tax regimes

Foreign Securities Holding Companies (ETVEs – "Spanish holding companies”): this is one of the most competitive regimes in the EU. Under certain circumstances, not only is the holding company’s income from foreign sources not taxed (95%), but neither is the income it distributes to its partner or the income it declares when the partner transfers its stake in the holding company.

Implementing ETVEs

Tax neutrality regime for restructuring operations (mergers, spin-offs, non-monetary contributions, exchanges of shares, change of address of a European company or a European cooperative company from one member state to another in the EU).

Special Canary Islands tax regime. Of all the tax incentives available to investors in the Canary Islands, the most notable is the Canary Islands Special Zone. The entities that take advantage of this tax incentive will pay a 4% Corporate Tax.

Patent box: Reduction of up to 60% of positive income from the transfer of patent usage rights and other intangible assets.

Other territorial tax regimes: The Historic Territories of the Basque Country and the Autonomous Community of Navarre are authorized to establish and regulate their own tax system. Income earned in Ceuta and Melilla also have specific tax incentives.

More information on Corporate Tax

Personal

Income Tax

Personal Income Tax (IRPF) applies to individuals who are tax resident in Spain. They are taxed on their worldwide income.

A taxpayer is considered to reside in Spanish territory when he spends more than 183 days in Spain in a calendar year or when the main base of his business or professional activities or economic interests is in Spain.

Workers assigned abroad: Personal Income Tax legislation establishes a very large exemption on income earned by workers who are tax resident in Spain but work abroad for a non-resident company or entity, or a permanent establishment abroad. This exemption applies to up to 60,100 euros a year, provided certain requirements are met.

More information on Personal Income Tax

Non-resident

Income Tax (IRNR)

Individuals and entities that do not reside in Spain will be taxed on income earned in the Spanish territory through the Non-resident Income Tax (IRNR).

With a permanent establishment (with PE): Non-resident individuals and entities will be taxed on all income attributable to the permanent establishment in accordance with Corporate Tax regulations, and referred to in the legislation on Non-resident Income Tax, to determine the permanent establishment tax.

Without a permanent establishment (without PE): Non-resident individuals and entities will be taxed separately for each full or partial accrual of income earned in the Spanish territory.

There are certain exemptions, including:

Interest and other income from the transfer of own capital to third parties, as well as capital gains from personal property, obtained without the intermediation of a PE by residents of other EU member states or by permanent establishments of those residents located in another EU member state.
Dividends distributed by a Spanish subsidiary to its parent company in the EU or European Economic Area in certain cases.
Public debt. Income earned from public debt obtained by individuals or non-resident entities without PE intermediation is exempt.
Income accrued through the international purchase and sale of goods.
Fees. Fees accrued between "associated" or fiscally related companies, and/or PEs located in the EU are exempt, when certain requirements are met.
Non-resident accounts. Income earned from those accounts paid to IRNR taxpayers is exempt.

Tax regime for inpatriates

Applied to any individual that becomes a resident of Spain as a result of work. Their income earned in Spain can be taxed at a fixed tax rate of 24% for the first 600,000 euros received during the tax period when the change of residence takes place and for the next five tax periods. Workers eligible for this regime will only be taxed in Spain on income earned in the country and not on income earned outside the country except, it is understood, for income from work obtained by the taxpayer in the Spanish territory while applying for the special regime.

Non-resident situation

Value Added

Tax

(IVA)

Standard rate	21%
Reduced rate	10%
Super-reduced rate	4%

Within Spain, VAT does not apply in the Canary Islands, Ceuta or Melilla.

The Canary Islands General Indirect Tax (IGIC) is applied in the Canary Islands. The standard rate for the IGIC is 7%.

Another indirect tax applies in Ceuta and Melilla (Tax on Production, Services and Imports).

More information on IVA and other taxes

IVA Case Study

Transfer

and Stamp Tax

The Transfer and Stamp Tax is an indirect levy on a range of taxable items, grouped under three types of transactions.

Property Transfer Tax

Tax on the transfer of public property or personal property.

Corporate transactions

Tax on the most relevant aspects of corporate financing, resulting from the partnership agreement and transfer of assets laid out in it, and from the incorporation and merger of companies, etc.

Legally documented acts

Tax on documents issued by notaries, mercantile registries and the government.

This tax has been delegated to the autonomous communities that have regulatory power over it, including the possibility of setting their own tax rates within limits. Accordingly, the tax rate is calculated by the corresponding autonomous community with the authority to collect it.

Taxes in Spain

The main direct taxes applicable in Spain are:

The most relevant indirect taxes applicable in Spain are:

Santiago Pantín

Our advisers

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