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Corporation Tax in Spain: All you should know

If you want to know how the Corporation Tax, also called Corporate Income Tax, this is your article. We will explain to who it applies and how to manage this process and avoid headaches.

What is Corporation Tax?

A Corporation Tax is a personal and direct tax levied on the profit obtained by companies and legal entities residing in Spanish territory. The points of determination of the tax base and the amount to be paid are based on the worldwide income and the accounting profit of the company. This amount is adjusted attending the tax law.

Companies are considered to be resident in Spain if:

  • They are established in accordance with Spanish law.
  • Its registered office is in Spain.
  • Its effective place of work is in Spain. The headquarters for effective management is considered to be located in Spain if the management and control of the company is in Spain.

Corporate income tax rate Spain

Table of Tax rates

General rate: 25%
Reduced rate for entrepreneurs: 15%
Reduced rate for tax-protected cooperatives: 20%
Reduced rate for partially exempt entities: 25%
Reduced rate for associations (of public utility) and foundations: 10%
Reduced rate for investment companies: 1%
Type reduced ZEC entities: 4%
Reduced rate for other entities: 25%
Type of banks and credit institutions: 30%

How to submit the Corporate Tax in Spain?

The forms that you must submit in Spain are:

  • Form 200: Annual Corporation Tax Return. It must be submitted every July in case the financial year of the companies coincides with the calendar year. It is always submitted during the 25 days following the 6 months from the financial closing date.
  • Form 202: Pre-payments of the Corporation Tax. It must be submitted when you have profit in Form 200 (or in any case of big companies). It is submitted in October, December and April.
  • Form 220: Tax form applicable to groups of companies.

All these models must be submitted through the Internet.

How are the tax base and the corporation tax calculated?

As we said before, it is calculated attending the accounting profit or loss of the company, that is, the difference between the incomes and the expenses obtained in the year.

However, this accounting profit/loss has to be adjusted attending the differences established by the Corporate Tax Law. These differences can be due because of qualification, valuation or imputation rules, and can be negative or positive and temporary or permanent.

Spain corporate tax rate 2019 changes

  1. A minimum rate of 15% will be set so that effective taxation is not reduced through the use of tax deductions and benefits. This measure applies only to groups that are taxed under the tax consolidation system and companies that are not part of a group with a net turnover of EUR 20 million or more. This minimum tax is 18% for banks and companies producing hydrocarbons, whose total tax rate is 30% higher than the normal rate of 25%.
  2. The exemption from tax on foreign dividends and capital gains, which is currently 100%, will be reduced by 5%.
  3. For companies earning less than EUR 1 million, the nominal corporate tax rate will be reduced from 25% to 23%.
  4. The tax authorities, not the CNMV, will have the right to claim, for purely tax purposes, non-compliance with the requirements established for SICAV in the financial rules, on which the tax rules make the application of a special 1% corporate tax regime dependent. The agreement sets additional requirements for the application of a reduced tax rate for SICAV in order to guarantee SICAV’s status as a collective investment instrument, to limit the concentration of capital with any individual investor and to make the collective nature of this instrument a goal.
  5. In accordance with the measures promoted by the 10 European Union countries, it is expected that a tax rate of 15% will be applied to the retained earnings of public investment companies listed on the real estate market (SOCIMI), which currently enjoy a 0% tax rate on income from their main activity – leasing real estate.

The calculations and the filling of the corporate income tax in Spain is something difficult because of the differences between the accountancy and the tax rules and because is based on well-done accountancy. If you need advice, we encourage you to contact GM Tax, the tax advisors in Barcelona. We will study your case in a particular way and find the best solutions together.