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Taxation in Spain

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Taxation in Spain

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Taxation in Spain

Do I need to pay tax in Spain?

Any person or legal entity with economic interests in Spain must hold a tax identification number (NIF) (legal entities) or a foreigners identity number (NIE) (individuals).

Tax resident entities are taxed on their world wide income. An entity is a tax-resident in Spain if it was formed following Spanish laws, or has its registered office in Spain, or it is managed in Spain.

Individuals are tax-residents if they live in Spain for more than 183 days in the year. They are taxed on world-wide income (except salary earned abroad up to 60 001 euros).

In general, income gained by non residents through a permanent establishment will be taxed at the normal tax rate. Non-tax residents whose income from Spain is not through a permanent establishment will be taxed on the income they receive from Spain, the general rate is 24%.

For sole traders / individuals:

0 - 12,450 19%

12,450 - 20,200 24%

20,200 - 35,200 30%

35,200 - 60,000  37%

60,000 + 45%

Corporation Tax

Corporate tax is standard at 25%. Lower rates are applicable in certain situations (such as smaller size). For small and medium-sized companies, tax on the first 120 202.41 euros of taxable income is 25%. Anything above that is taxed at 30% (annual sales less than 8 million euros).

The tax period is the company's financial year. All returns must be filed and tax paid within six months and 25 days of the end of their financial year.

What sort of registrations will I have to complete for tax?

Any person or legal entity with economic interests in Spain must hold a tax identification number (NIF) (legal entities) or a foreigners identity number (NIE) (individuals).

You will also need a CIF code (Codigo de Idenificacion Fiscal). This is a tax identification code.

You will need to register to pay IAE tax (Impuesto de Actividades Economicas). This is a local tax on businesses with an annual turnover of more than one million euros. Even if your turnover is less than this you will still have to register with local authorities.

What's IVA?

IVA is VAT in Spain. VAT in Spain doesn't usually mean any cost to suppliers as they can deduct the VAT incurred against that charged. Usually it is the consumer who bears the cost of VAT.

VAT is not applicable in the Canary Island, Ceuta, Melilla. Instead, these places have their own forms of tax similar to VAT, but at a different rate (for example 5% in the Canary Islands).

The standard rate of VAT is 21 % and this applies to most goods and services. There is a reduced rate of 10% applicable to things such as food, water, pharmaceutical products etc. There is a super-reduced rate of 4 % applicable to things such as bread, milk, flour etc. Certain things are VAT free, such as insurance and financial services, health, education etc.

How much is the stamp duty?

  • On corporate transactions such as incorporation, capital increase it is 1%

  • On transfers of real estate it is 6%

  • On transfers of movable assets it is 4%

What if I am employing people?

You should be aware that as an employer you pay between 30-32% of your employees social security payments. Employees pay about 6-7% as a general rule.

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