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Taxation in Spain

Taxation in Spain

Updated on Tuesday 26th April 2016

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taxation_in_spain.jpgEvery time a foreign investor chooses a country to perform business in, one of the most important things he is interested in is the taxation system. Certain countries are attracting a large number of foreign entrepreneurs due to the taxation level that is very low and other countries offer important incentives for investing in certain economic sectors.

One of the major taxes for doing business in Spain is the corporate tax that has been constantly decreased from 2006 to 2014 and onward. This is an important step followed by the Spanish authorities in order to increase the number of local and foreign investors.

Corporate taxation in Spain
 

The corporate income tax rate in Spain has been reduced progressively over the last years. It was reduced from 28% to 25% as of January 2016, however, special larger rates may be applicable, for example in cases of banks in Spain which are taxes at a higher 30% rate.
 
The corporate tax in Spain applies for all resident companies on their worldwide income and only on the Spanish-source income for non-resident companies such as branches in Spain. Special incentives are in place for research and development activities and foreign companies in Spain can also benefit from reduced withholding tax rates on dividends, under the double tax treaties concluded with other countries worldwide.
 
Other taxes for companies include the social security tax for companies that hire employees in Spain, the payroll tax, the real property tax, the stamp duty and the transfer tax.

Taxation for individuals in Spain

Resident individuals are subject to worldwide taxation on their income produced in Spain while non-residents are only taxed on their income produced in the country. An individual is considered a Spanish resident if he or she spends more than 183 days of the tax year in the country. Spain imposes a progressive personal income tax system, with rates between 19% and 46%.
 
The tax year is generally the calendar year both for individuals and for legal entities.

VAT in Spain
 

Another important tax in Spain is the value added tax (VAT), at the standard rate of 21%. There are reduced rates for certain products and services: 10% for cultural events, hotels and most drinks and 4% for basic food.

The legislation for foreign investments in Spain has been changed and it is favorable for attracting new businesses in this country. The goal of the Spanish authorities is to attract more foreign investments and to protect certain sectors that are vital for this country. Because of this, the Spanish authorities imposed some restrictions on the fields such as air transport, radio, television, raw materials, private and national security etc.

If you need to know the taxes you will have to pay for your business in Spain, regardless of the business field in which you operate and type of company you run, you may contact our law firm in Spain. Our Spanish attorneys will keep you up to date with the legislation related to taxation in this country and they will recommend you the best type of company.

 

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