Essential Business Taxes, Invoices, and Payment Methods Explained

Business Taxes Overview

Understanding the core taxes applicable to business individuals and companies is essential for legal compliance and financial management.

IAE (Economic Activities Tax)

Applicable to business individuals and legal entities. Companies and individuals do not have to pay this tax if their turnover is under one million euros.

IS (Corporate Tax)

Taxes applied to corporate profits at a rate of 35%. Must be accounted for quarterly (four times a year).

Income Tax

Used to compute and declare business profits:

• Direct estimation: Calculated based on ordinary records. Mandatory if invoicing exceeds 600,000 euros.
• Simplified estimation: Voluntary for businesses invoicing under 600,000 euros, appearing in the EHA.

Value Added Tax (VAT)

A consumer tax applied across most regions, excluding the Canary Islands, Ceuta, and Melilla.

General Scheme

VAT is paid on merchandise purchases from a supplier (supported VAT) and charged upon sales (repercussed VAT).

Tax Rates

• Super-reduced (4%): Bread, milk, and basic food items.
• Reduced (7%): Hospitality, theater tickets, seeds, and housing.
• General (16%): Post, hospitals, insurance, lotteries, and second-hand housing.

Tax Obligations

• Registration in census options for VAT.
• Filing regular tax declarations.
• Demanding and delivering invoices while keeping copies.
• Maintaining accounting ledgers.

Simplified Regime

Voluntary scheme with fractional payments in July and January, and final sales declarations carried out between January 1st and 30th.

Equivalence Surcharge: A special retailer tax scheme where the retailer pays an added percentage, freeing them from standard VAT obligations.

Commercial Roles

• Wholesaler: An intermediary who acquires large quantities of products for industrial consumption to resell them.
• Retailer: A commercial buyer who purchases products through wholesalers and sells individual units directly to consumers.
• Major: Large-scale distributor handling bulk goods.

Withholdings and Renditions

Employers must withhold specific amounts from professionals (during payments), workers, and others, subsequently paying these sums to the tax agency.

Categories of Rendition

• Employment income (salary and wages)
• Capital mobility
• Professional activities
• Prizes and awards
• Real estate capital yields
• Agricultural yields

Administrative and Commercial Processes

Standard workflow for commercial transactions:

1. Order generation
2. Goods delivery note
3. Invoice issuance
4. Payment processing
5. Receipt issuance

Commercial Documents

• Commands: A proposition of products made by a client via a representative or in writing.
• Delivery Note: Details characteristics and quantities, serving as proof of delivery.
• Invoice: A legal document formalizing a sale operation between two parties. It includes identifying details, unit prices, total import costs of goods or services, and clearly separated tax amounts.

Payment Instruments

Bill of Exchange

A document utilized as a payment method in which the drawer orders the drawee to pay a certain amount to the payee at a determined place and date.

• Types: Commercial, financial, etc.
• Elements: Drawer, payee, and drawee.
• Formal Elements: Stamp, place of delivery, order of payment, import, quantity, maturity date (fixed day, at sight, etc.), addresses, clauses, names, acceptance, guarantees, and endorsements.

Check

A credit document by which a bank account owner orders a payment through the bank.

• Formes: Nominative, to bearer, or to order.
• Special Types: Crossed check, account payee check (abonado a cuenta), and certified check (conformat).

Receipt

A document issued by a person to acknowledge and confirm the receipt of a specific amount of money accepted from the payer.