Understanding Public Revenue, Corporate Tax, and VAT Systems

Public Revenue

1. Prices

Pecuniary tradeoffs are satisfied by the provision of public services.

2. Taxes

Taxes paid for the provision of services or the administration of this exclusive company.

• Contributions: Taxes paid by earning a profit as a result of public works.
• Taxes: Levies without direct consideration where a taxable event is triggered by business activity.

Classification of Taxes

1. Taxable Basis

• Direct: Records the taxpayer's income or assets (Real: IBI or Personal: PIT).
• Indirect: Records the application of income regardless of the taxpayer's circumstances (VAT).

2. Tax Rates

• Fixed Fee: Every taxpayer pays the same amount.
• Proportional: The tax rate is constant and independent of the tax base (e.g., VAT).
• Progressive: As income or property rises, a higher tax rate is applied (e.g., Income Tax).
• Regressive: As income increases, the tax rate becomes lower.

Corporate Tax

This is a direct, personal, and proportional tax. It applies to legal entities, excluding civil societies and specific entities determined by law.

• 1. Taxable Base: Income minus expenses.
• 2. Tax Rate: General rate of 30% (as of 2008). For SMEs (turnover < 8 million €), 25% applies to the first 120,202 € of the taxable base, with the remainder at 30%. Cooperatives and others are taxed at 20%.
• 3. Gross Tax Liability: Taxable base multiplied by the tax rate.
• 4. Net Tax Liability: Gross tax liability minus deductions.
• 5. Tax Payable: Net tax liability minus deductions and payments on account.

Value Added Tax (VAT)

An indirect, actual, and proportional tax based on the consumption of goods and services. It applies in the Spanish territory and the Balearic Islands, excluding Ceuta, Melilla, and the Canary Islands (which use the Canary Islands General Indirect Tax). It also applies to sea and air space up to 12 nautical miles.

• Taxable Base: Total amount of the consideration.
• Tax Rates: General (16%), Reduced (7% for transportation, food), and Super-reduced (4% for staples).
• Gross Tax Liability: Taxable base multiplied by the tax rate.
• Tax Payable: Calculated at the time of purchase or receipt.

Settlements and Returns

Companies liquidate quarterly the difference between output VAT (sales) and input VAT (purchases):

• 1st: April 1–20
• 2nd: July 1–20
• 3rd: October 1–20
• 4th: January 1–20

Special Regime for Retailers

The supplier is obliged to pass the taxpayer a VAT rate plus an additional surcharge:

• 16% VAT + 4% surcharge
• 7% VAT + 1% surcharge
• 4% VAT + 0.5% surcharge