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How does Spain tax corporate income?

How does Spain tax corporate income?

Individuals operating their own business or planning a startup in Spain will need awareness of the Spanish tax system in order to succeed. Del Canto Chambers specialise in Spanish and UK tax advice and tax compliance as well as tax inspections. The brief guide below sets out the basics of the tax system for corporate income in Spain.

Corporate Income Tax

Corporate Income Tax (CIT) is generally rated at 25% in Spain, although other tax rates can apply. These additional rates will depend on the type of business conducted and the sort of company being taxed.

How are Spanish resident companies taxed?

Any company resident in Spain is taxed on global income.

How about non-resident Spanish companies?

A Spanish company will be taxed by the Corporate Income Tax at 25% even if the main or only shareholder is a foreign company or individual. But, on the other hand, any foreign company developing its activity in the Spanish territory will be charged by the Non-Resident Income Tax. This is chargeable on all income that has been generated or allocated to the permanent business establishment and charged at 19% if the company is located in the EU, and at 24% if is a Non-EU foreign company.

Startups in Spain

Most Spanish startups will only be taxed at 15% for the first two tax years in which profits were achieved. The exceptions to this ruling are financial equity businesses or startups created by national or international corporate groups. Furthermore, the reduced tax rate does not apply if this business activity was previously conducted by any related individual or entity.

Taxes on business and professional activities

One local direct tax which is also charged is the annual business and professional activities tax. This tax relates to the performance of business, artistic or professional activities of any kind and is not in any way related to the premises used. The tax is applied at different levels depending on a range of factors, including the activities conduction, and the location and size of the premises. Tax on business and professional activities will never be more than 15% of any average profits achieved by this professional or economic activity. Any business liable to corporate income tax or any non-resident company operating a permanent business establishment in Spain is exempt from this tax if net turnover filed by 1 January of the previous local tax year was lower than €1,000,000.

If you need support with any issues related to taxation in the UK or Spain, don’t hesitate to get in touch with our experts today.

Adrian Soto
Asesor Fiscal
Del Canto Chambers

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