Understanding Accounting and Taxation for Businesses

Operational Accounting Fundamentals

Accounts: Information on each central patrimonial element. The account name and code should be placed on the left, with the debit (debe) on the left and the credit (haber) on the right. The account balance is the difference between the sum of amounts in the debit and credit columns.

Two types of accounts exist:

• Balance Sheet Accounts (Heritage Accounts): These record changes occurring in the elements that make up the company's balance sheet and show its financial situation at a given time (e.g., transport assets, stocks).
• Income Statement Accounts (Management Accounts): These record revenues collected and expenses generated as a result of the company's operations (e.g., purchases, wages, rentals, sales).

Company Taxation Essentials

Types of Taxes

• Direct Taxes: Personal and economic, levied directly on income or wealth.
• Indirect Taxes: Levied on the economic capacity of the taxpayer as manifested through consumption.

Elements of a Tax

• Taxable Event: The legal or economic event that gives rise to a tax obligation.
• Taxpayer (Sujeto Pasivo): The individual or entity required to meet the tax obligations.
• Tax Base (Base Imponible): The quantifiable and valued economic event to which the tax rate is applied, established by law.
• Tax Rate (Tipo de Gravamen): The percentage or fixed amount applied to the tax base to determine the gross tax liability.
• Tax Liability (Cuota Tributaria): The final amount of tax to be paid, resulting from multiplying the tax base by the tax rate.

Business and Entrepreneurship Taxes

Corporate Income Tax (Impuesto de Sociedades)

• Taxable Transactions: Income derived from business activities.
• Taxable Persons: Legal entities.
• Tax Base: Determined from the accounting profit.
• Tax Rate: Typically 30%. Various deductions may apply.
• Installment Payments: Entrepreneurs are required to make advance payments during April, October, and December.

Personal Income Tax (IRPF)

• Taxable Event: Obtaining income.
• Taxable Persons: Individuals residing in Spain.
• Tax Base: The total amount of income obtained during the tax period.
• Tax Rate: Personal Income Tax is a progressive tax, meaning the tax rate increases with the amount of the tax base.
• Deductions: May include deductions for main residence, donations, etc.
• Installment Payments: Quarterly advance payments are obligatory within the first 20 days of April, July, and October.

Municipal Taxes in Spain

Key Municipal Taxes

• Tax on Economic Activities (IAE): Levied on natural persons engaged in business or professional activities.
• Real Estate Tax (IBI): Levied on property owners.
• Vehicle Tax (IVTM): Levied on owners of motor vehicles.
• Tax on Constructions, Installations, and Works (ICIO): Levied on new constructions, installations, or works.
• Tax on the Increase in Value of Urban Land (Plusvalía Municipal): Levied on individuals who benefit from an increase in urban land values upon transfer.