Income Tax for individuals and Corporate Tax in Spain

Today in our article, we would explain the main characteristics of taxes on the income obtained by individuals and companies.

Kinds of Income Tax

First of all, we have to say that in Spain there are two kinds of taxes on the income:

  • Tax on individuals (called IRPF and IRNR) that can affect the income of resident and Non-Resident people.
  • Corporate Tax (called IS) that affects the income of companies.

Individual Income Tax (IRPF)

The income tax for individuals (IRPF) is a personal, subjective, direct, annual and progressive tax that taxes the worldwide income during a calendar year. Specifically, the incomes that are affected by this tax are those that come from work, capital (immovable properties and stock, shares, all type of investments) and other economical activities (business). You must fill in the Tax Form according to the Law considering all the income received during a calendar year and as a result you have to pay the tax (in two installments) or to ask for the refund. This tax is the most important of Spanish tax system given due to the amount collected

Tax on income of Non-Residents (IRNR)

The income tax for individuals or companies that are non resident in Spain (IRNR) is a personal, subjective, direct, annual and progressive tax that only taxes the income obtained in Spain instead of their worldwide income.
Incomes that are affected by this tax as we explained in our article about if you have to pay Non-Resident IRPF are:

  • Activities carried out in Spanish territory, including business, whether or not there is a physical location.
  • Salaries and other incomes that come from a personal activity carried out in Spain.
  • Income from real estate in Spain.
  • Capital gains that come from securities, shares, or financial products that comes from individuals or companies that are Spanish resident.
  • Pensions and benefits received from the state of being non-resident.
  • Director fees from the board of directors of Spanish companies.
  • Dividends and income from shares of Spanish companies.
  • Fees such as right in patents, plans, artistic works, computer programs, etc that are satisfied by residents in Spain.

Corporate Tax

The last tax that we comment in this article is the Corporate Tax (IS) that affects the income of companies that are resident in Spain. It is a personal, direct, objective and periodic tax.
In order to determine its taxable base and the amount that finally has to be paid, it is necessary to start from the Profit and Loss Account that has to be modified by some positive or negative adjustments and then offset the previous year losses against the taxable profit
The forms that are related to IS are:

  • Form 200 “Corporate Tax” that is applicable to companies and other entities and to all IRNR taxpayers with a permanent establishment in Spain.
  • Form 202 “Corporate tax, split payment general regime”.
  • Form 220 “Corporate tax, fiscal consolidate regime” applicable to taxable groups.

We recommend you to read this article if you wish to know more about Corporate Tax in Spain, in this article we explain you how to submit it and how calculate the taxable base and the income tax.

If you need an adviser’s office to submit these taxes or you have any doubt about them, we encourage you to contact with GMTax. We are an expert in issues related to Tax Agency and we use our knowledge in order to attend each case in detail.