Key Taxes in Spain: Corporation, Income, and VAT Explained

Corporation Tax in Spain

Corporation Tax (IS) is a direct and personal tax levied on the income of corporations.

Taxable Event

The taxable event is the acquisition of income by companies resident in Spanish territory, regardless of its origin.

Taxable Person

The taxable person is the legal entity, specifically a commercial company.

Taxable Income

Taxable income comprises certain parts of the accounting profit.

Tax Rates

General rate: 35%. Reduced rates apply for:

• Small and Medium-sized Enterprises (SMEs): 30%
• Cooperatives: 18%
• ...and other specific cases.

Deductions

Deductions reduce the tax base. Examples include deductions for environmental protection and job creation.

Payment Schedule and Deadlines

Companies must make installment payments for Corporation Tax (IS) in April, October, and November, with a year-end adjustment.

The final IS payment is made at the Tax Delegation or collaborating credit institutions within 25 calendar days following the six months after the conclusion of the tax period (typically from July 1st to July 25th).

Personal Income Tax (IRPF) in Spain

Personal Income Tax (IRPF) calculation requires comprehensive information about the individual taxpayer. It is a direct and personal tax levied on the income of natural persons, considering their personal and family circumstances.

It taxes the profits obtained by individual business owners from their economic activities and the remuneration (salary) received by workers. A portion of the Personal Income Tax is transferred to the Autonomous Communities (CCAA).

Taxable Event and Exemptions

The taxable event is the acquisition of income by the passive subject (taxpayer). There are certain exemptions, such as aid for individuals affected by AIDS, aid for fostering disabled persons, and aid for people over 65 years of age.

Taxable Person

The taxable person is any natural person ordinarily resident in Spanish territory.

Taxable Base

The taxable base includes income from various sources during the tax period:

• Work performance (employment income)
• Fixed and movable capital (investment income)
• Economic activities (business and professional income)
• Capital gains and losses

Tax Rates

IRPF is a progressive tax, meaning that higher income leads to a higher tax burden. Its calculation is based on specific tax tables.

Deductions

Common deductions include those for investing in a primary residence and family-related deductions.

Withholdings

Employers are obliged to withhold a portion of their employees' wages as an advance payment for Personal Income Tax.

Value Added Tax (VAT) in Spain

Value Added Tax (VAT) is an indirect tax levied on the consumption of goods and services provided by entrepreneurs or professionals within Spanish territory.

Taxable Event

The taxable events include:

• Supply of goods and services by entrepreneurs and professionals.
• Intra-Community acquisitions (from another EU country).
• Importations of goods.

Note that some operations are not subject to VAT.

Taxable Person

The taxable persons are entrepreneurs and professionals who carry out transactions subject to VAT. They are obliged to charge VAT to the buyer, who ultimately bears the tax burden.

Taxable Base

The taxable base is the total amount of the purchase or supply of services, including associated costs like transport and packaging.

Tax Rates

VAT rates in Spain are:

• General: 16%
• Reduced: 7%
• Super-reduced: 4%

Deductions

Entrepreneurs liable for VAT can deduct the input VAT (VAT paid on their purchases) from the output VAT (VAT charged to their customers) when submitting their tax declarations.

Taxpayer Obligations

Obligations of the taxable person include submitting periodic VAT declarations and issuing invoices.