A foreign investor wishing to carry out economic activities in Spain through a non-Spanish company has several ways of making this investment: by creating a Spanish subsidiary company or through a permanent establishment. The former would have a legal structure equivalent to any other company incorporated within Spanish territory, whereas a permanent establishment lacks legal personality and is directly dependent on a company based abroad.
In this article, we will explain the tax obligations that a foreign company will face if it has a subsidiary or a permanent establishment in Spain.
Quarterly and annual VAT and personal income tax (IRPF) returns
VAT (Value Added Tax) is an indirect tax imposed on the consumer, although the business acts as a collector on behalf of the tax authorities. VAT must be declared on a quarterly basis, and at the end of the year, an annual summary is submitted.
The quarterly VAT returns must be filed between the 1st and 20th of the month following the quarter:
- The first quarter’s return is submitted in April.
- The second quarter’s return is submitted in July.
- The third quarter’s return is submitted in October.
- The fourth quarter’s return is submitted in January.
Each quarter, form 303 must be submitted for VAT, and forms 111 and 115 for personal income tax (IRPF) if you have employees or carry out your business in rented premises, in addition to other specific forms depending on the company’s activity.
In the event that the 20th falls on a non-working day, the deadline is extended to the next working day. For example, if 20th April falls on a Saturday, the quarterly VAT return can be filed until Monday, 22nd April, although the deadline for direct debits remains on the 15th, regardless of weekends.
Monthly VAT returns
Companies with an annual turnover exceeding €6,010,121 in the previous year, as well as those registered under the monthly VAT refund scheme (REDEME), are required to file VAT returns on a monthly basis. These companies must submit form 303 monthly, within the first 30 calendar days of the following month.
In addition to quarterly and monthly returns, an annual summary must be submitted within the first 30 calendar days of January.
Corporate tax
Corporate tax is a direct tax levied on the income of companies and other legal entities that reside in Spanish territory, such as subsidiaries and permanent establishments.
Form 200 is the annual corporate tax return. It must be filed between the 1st and 25th of July each year if the company’s financial year coincides with the calendar year. It is mandatory to file the return even if no business activity has been conducted or no income has been earned.
If a positive result was reported in the last Form 200 return, or if the company is classified as a large enterprise, Form 202 for instalment payments must also be submitted.
This form is submitted in April, October, and December.
Annual accounts
Subsidiary companies or those with a permanent establishment in Spain are also required to file their annual accounts with the Commercial Register once a year. Specifically, the following must be submitted:
- The balance sheet
- The notes to the accounts
- The profit and loss account
- The statement of changes in equity
- The cash flow statement
The maximum deadline for submitting the annual accounts is one month after their approval by the Annual General Meeting of Shareholders, with a final deadline of 30th July of the year following the financial year.
If you need advice on carrying out any of these procedures in Spain, please contact GM Tax. We manage all your obligations with the Spanish Tax Authorities professionally and personally, saving you time and ensuring that you comply with all mandatory quarterly and annual formalities.
