Business Taxes in Spain

Information on Spain’s main business taxes – Company Tax, IAE tax, and VAT – as well as other business-related taxes and Spain’s tax year.

Company Tax or Corporate Income Tax

(Impuesto de Sociedades): This is a national business or corporate income tax in Spain on all types of Spanish companies (as well as nonresident companies in Spain) except the Sole Trader (Autónomo). (Sole Traders report their business and personal income together on their IRPF instead.) The standard Company Tax rate is 30%, but small and medium companies (PYMEs), who are defined as having a net turnover of less than three million euros each year, are only taxed at 25% on the first 120,202 euros earned and at 30% for income above that figure.

Spanish companies are taxed on their worldwide income. Nonresident companies in Spain, however, are only taxed on their Spanish income. In Spain business income for tax purposes is defined as all business revenue and includes all capital gains (though a capital gains tax credit may be available), less expenses and VAT payments.

The Company Tax return should be filed with the national Spanish tax authorities, the Agencia Estatal de Administración Tributaria, no more than six months and twenty-five days from the end of the company’s fiscal year. Businesses with an annual turnover of more than six million euros should also pay three advance tax payment installments in April, October, and December.

Tax on Business Activity or IAE Tax

(Impuesto de Actividades Económicas): This is a local tax levied on resident and nonresident businesses in Spain with an annual income of more than one million euros. Even if your business brings in less than one million euros a year and you are not required to pay IAE tax, you should still make sure that you’re registered with the local authorities to pay IAE tax. If you live in a town with more than 50,000 inhabitants, check with your local town hall (ayuntamiento) for the local requirements on registering. If you live in a town with less than 50,000 inhabitants, check with your local provincial government.

VAT in Spain

(IVA, Impuesto Sobre el Valor Añadido): This isn’t a tax on you but on your customers, and more specifically, on the purchases that your customers make for your goods and services. The VAT rate ranges from 4% to 16%. However, as a business, you’re the middleman who has to collect the VAT and hand it over to the Spanish government via the Agencia Estatal de Administración Tributaria. All businesses must file quarterly VAT statements and pay the corresponding amounts. 

Other Business Taxes:

Depending on a particular business’s activities, businesses in Spain may also be liable for other taxes. These may include various real estate taxes (see the last section of Taxes in Spain) and a municipal tax on motor vehicles. Not a tax per se, but businesses must also pay Social Security contributions for each employee.

Tax Year: Spain’s tax year follows the natural calendar year.

Straight from the Horse’s Mouth: Spain’s main tax agency, the Agencia Estatal de Administración Tributaria, can be found on the web at http://www.aeat.es/.

Other Resources: Business in Spain, Taxes in Spain, Start a Business in Spain, Companies in Spain: The Types of Business Entities for Companies in Spain.

Last updated 11 05 2008

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