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Business Taxation for Expats in Spain

Submitted: August 2013

This guide covers tax issues for limited companies. For tax issues for self-employment please see: Taxation - Employment Taxation for Expats in Spain.

The Spanish Tax Authority is the Agencia Estatal de Administración Tributaria (AEAT)


Registration

The most commonly used forms of doing business in Spain are:

          • limited liability companies (both public and private)
          • branches or representative offices

Newly formed Spanish companies must first obtain a notarised deed of incorporation. This will include details such as the purpose of the company, the articles of association and the names of the directors. Then the new company must apply for a tax identification number (NIF) at the AEAT. Once this is done the deed of incorporation must be registered at the Spanish Commercial Registry (Registro Mercantil) of the province where the company is domiciled, and an opening licence must be obtained from the local town hall.
All companies active in Spain must register for VAT and submit returns and payments quarterly in the case of small companies. Spain’s VAT rate is one of the highest in Europe at 21%.
More information regarding all tax matters is available here.
Contact details for the AEAT are available here.

Corporate Tax (Profits Tax)

The Spanish tax year for companies runs from 1 January to 31 December. Companies may have a different business year for accounting purposes. Spanish resident companies are liable for corporate income tax on their worldwide income and capital gains. Non-resident companies are generally only liable for corporate income tax on their Spanish source income and gains.

Spain has three corporate tax rates on profits. For the year starting 1 January 2013 this are:

There is a special rate for new companies in the first year of profitability of 15% on profits of less than €300,000 and 20% on profits above €300,000.

In addition companies may have to pay local business tax, an annual real estate tax and national insurance contributions on behalf of its workforce.

There are advantageous rules for companies operating in the Canary Islands, Navarre, Ceuta and Melilla, and the Basque Country.

In Spain capital gains (after adjustment for inflation) are treated as ordinary income and taxed as such. However capital losses cannot be offset against ordinary income, and vice versa.

Companies must file their Spanish corporate income tax returns and pay their tax liability within six months and 25 days from the end of their business year. Returns may be filed online.

Companies must make advance payments of corporate tax within the first 20 days of April, October and December. Generally the amount they have to pay is 18% of their previous year’s tax liability (adjusted for any overpayments). There is a separate method for calculating advance payments for companies with a turnover of approx €6m.

Small companies (less than approx €6m) must pay any tax withheld at source on salaries, interest and dividends every quarter.

Penalties apply for late payment and can reach a 20% surcharge plus interest.

 

 




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