Taxation in Spain
Spain Country and Foreign Investment Overview
Spain’s economy has suffered hugely during the recession. Since joining the EU, Spain enjoyed rapid growth; over the past 40 years its tourist industry had grown to the second largest in the world and accounted for around 50% of GDP in 2006.
The real estate boom that followed contributed almost 16% of GDP and employed 12% of the workforce.
The collapse of the property boom has led to high increases in personal debt with unemployment now at the 26% mark.
The standard corporate income tax rate is 30%. Personal income tax ranges from 24% to 45%. For 2012 and 2013 tax years, a supplementary tax of between 0.7% and 7% applies.
Domestic Corporate Taxation
Scope of Corporate Tax
All resident companies and permanent establishments of non-resident companies are subject to income tax. Resident companies are liable for tax on their worldwide income. Non-resident companies are taxed on their Spanish-sourced income only.
Income Tax Rates
The corporate income tax rate for 2013 is 30%. For businesses with a turnover of less than EUR10m, the first EUR300,000 of profit are taxed at either 20% or 25%. Micro enterprises with a turnover below EUR5m and fewer than 25 employees is taxed at 20% for the first EUR300,000 and anything above that at 25%.
Calculation of Taxable Base
Taxable income includes all trading profits, passive income and capital gains. The first EUR6,000 of capital gains is taxed at 19%; after that, the rate increases to 21%.
Federal or local losses may be carried forward for a maximum of 15 years.
Filing Requirements and Payment of Tax
The tax year is generally the calendar year, although the company may choose an alternative accounting year. Tax returns must be filed and all taxes due paid by the 25th day following the sixth month of the end of the tax year.
Companies are generally required to make three tax prepayments in April, October and December of each year, based on accounts of the first three, nine and 11 months of the calendar year, respectively. This is compulsory for businesses with an annual turnover of more than EUR6,010,121.04 (for 2012), at a rate of between 21% and 29%. However, companies with a turnover below this threshold can opt to pay instalments at a rate of 18% of the gross tax payable in the previous year.
Withholding tax of 21% is payable on interest and dividend payments, whether domestic or to non-treaty countries. However, where dividends are paid to a company that has share capital, which has been held during the prior year, equal to or above 5%, withholding tax does not apply.
Royalties are generally subject to withholding tax of 24.75% in the case of the licensing of rights of publicity, and 18% for other royalties. Until 2011, royalties paid to associated EU-resident companies are subject to withholding tax of 10%.
Other withholding taxes include 18% on commission, rental payments and contest prizes; 15% on income from courses, conferences, symposiums, seminars or derived from the literary, artistic or scientific work; and 2% on farming income and forestry activities.
Sales Tax and VAT
The standard VAT rate is 21%. A reduced rate of 10% applies to food production and services.
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