Business Location Factors and Tax Obligations

Key Factors for Business Location

When choosing a location for your business, consider these essential factors:

• Location:
  • Market demand: Analyze the interest in your product at the desired location. This includes assessing potential consumer response, competition, and other relevant market factors.
  • Supply of raw materials: Evaluate the quality and cost of materials.
  • Communication and transportation: Ensure easy access to the site and good communication for both customers and suppliers.
  • Utilities: Verify the availability and cost of electricity, water, and telephone services.
  • Construction and land costs: Note that these costs can vary significantly between areas.
  • Legislation: Understand the legal rules and restrictions, including tax, commercial, social, and aid-related regulations.
  • Investment and financing: Choose a location with easy access to financial institutions and options for new investment.
  • Economic development of the region: Assess the region's development as a positive indicator for future growth.

Elements of Tax Declaration

• Taxable Event: The reason that triggers the tax.
• Taxable Amount: The amount on which the tax rate is applied.
• Taxable Base: The result of subtracting legally allowed deductions from the taxable amount.
• Tax Rate: The percentage applied to the taxable base.
• Tax Fee: The taxable base multiplied by the tax rate. This may be the amount to be paid if there are no bonuses or penalties.
• Tax Debt: The amount you need to pay, minus bonuses and plus surcharges.
• Contributor: The natural or legal person who pays the tax.
• Taxable Person: The subject on whom the tax is levied.

Tax Law

A. Tribute: Revenue for the public sector.

• Taxes: Tax benefits paid to the government.
• Contributions: Payments made to a public body by an individual, which will benefit the community.
• Fees: Government income without direct benefit for the taxpayer.

B. Direct Taxes: Those based on income.

• Income Tax of Individuals (Income Tax): A personal tribute, divided into:
  • Income from work (employment)
  • Income from real estate
  • Income from capital
  • Income from business activities (self-employment)
  • Capital gains and losses

  It can be filed individually or jointly with a spouse. Taxpayers earning income may be eligible to determine the level of the different components of the tax base by:

  • Direct assessment scheme: You must calculate the profit of your business and keep accounting records.
  • Objective assessment arrangements: A set amount is taxed regardless of costs and revenues. Bookkeeping is not mandatory if this option is chosen.
• Corporate Tax (IS): Levied on the income of companies with positive profits. The tax rate for SMEs is 25% up to €90,151.82 and 30% for the remainder, as well as for other companies.
• Tax on Economic Activities (IAE): To promote the emergence of more SMEs, this tax is collected by the City Council and applies to artists and some individual business owners.

Indirect Taxes: Those based on consumption.

• Excise Taxes: Levied on the consumption of products considered harmful to society, such as tobacco, alcohol, and hydrocarbons.
• Value Added Tax (VAT): A European tax levied on:
  • Supply of goods and services by entrepreneurs and professionals
  • Acquisition of goods
  • Imports of goods

  VAT applies in mainland Spain and the Balearic Islands. Exempt transactions include health, education, and insurance recruitment. For employers, VAT is neither an expense nor an income, but for consumers, it is, as they cannot deduct it. Each quarter, the company settles accounts with the tax authorities, resulting in either a payment or a refund. In this way, the company acts as an intermediary for the tax authorities to collect this tax. This operation does not result in any expense or income for the company.

VAT Rates

• Super reduced rate (4%): Applies to staples like bread, milk, cheese, eggs, vegetables, fruits, and natural tubers that have not been modified in any way. It also applies to books, newspapers, and magazines without advertising, human medicines, wheelchairs and prosthetics for the disabled, and subsidized housing (VPO).
• Reduced rate (8%): Applies to a long list of goods and services, including foods not covered by the super-reduced rate, passenger transport, hotel services, tickets to shows, funeral services, hairdressers, dentists, buildings, houses, and accessories for the diagnosis or alleviation of diseases.
• General rate (18%): Applies to most products and services, including clothes, shoes, furniture, appliances, DIY, tobacco, and alcohol.

VAT Paid: Total VAT paid by the buyer.

VAT Collected: Amount of VAT the vendor, as a company, has applied and therefore collected.