Income Tax in Spain

Updated on Wednesday 23rd September 2020

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The income tax in Spain is a type of tax that is charged on the income obtained by both natural persons and legal entities (divided between the personal income tax in the case of natural persons, and the corporate income tax, in the case of corporate entities).

According to the tax legislation available here, the obligation to pay the income tax in Spain is also imposed in the case of entities that have their tax residency elsewhere - they can be natural persons or business forms. However, there is a difference in the manner in which this tax is calculated in this case, as Spanish tax residents must pay the income tax in Spain for their global income, while foreign entities must pay it only for the income obtained from taxable activities developed here.

Persons who need consultancy services on the income tax can receive in-depth information on this subject from our team of Spanish lawyers. Our law firm can also provide legal representation to those who need to register for taxation, including for the income tax in Spain.

What are the tax obligations for natural persons in Spain?

Natural persons in Spain are legally required to pay taxes if they obtain a taxable income. The obligations of individuals refer to paying the required amount due, to submitting the necessary tax returns and to register for taxation for various types of incomes. The current tax rates charged to tax residents in Spain are the following:

an yearly income of up to EUR 12,450 is charged with the income tax in Spain applicable at a rate of 19%;
income that ranges from EUR 12,451 to EUR 20,200 is charged with a rate of 24%;
the next tax rate is of 30%, applicable to an yearly income of EUR 20,201 to EUR 35,200;
persons who obtain a taxable income ranging from EUR 35,201 to EUR 60,000 will be charged with a tax rate of 37%;
any income that is above EUR 60,000 is taxed with a rate of 45%.

In the case in which the persons are tax residents in Spain, the annual income will take into consideration other incomes obtained in foreign countries, and then taxed with the necessary tax rate. Persons who are foreigners living in Spain should be aware of the fact that they will become liable for the payment of this tax if they live here for more than 183 days.

As a natural person, the tax liability can arise for the payment of the income tax in Spain in situations such as: the person has started a business in his or her own name (such as sole trader) or in the case in which the person obtains an income from renting real estate properties; our team of Spanish lawyers can offer more details on the tax liability of a natural person.

What is the standard corporate income tax rate in Spain?

Businesses must also prepare to pay the income tax in Spain, which here is charged at the standard rate of 25%. All corporate entities must pay this tax rate on their income, but investors should know that they can benefit from a lower corporate income tax, in certain conditions that can be explained at length by our Spanish law firm.

It must be noted that Spanish businesses can pay a corporate income tax of only 15% in the first two years of activity when they obtain a profit. Foreign companies are charged with this tax and foreign investors should also know that permanent establishments will also be liable to paying the income tax in Spain.

The tax rates and other procedures referring to paying the income tax as a corporate entity are prescribed by the Corporate Income Tax Act (the Spanish Act 27/2014). The legislation presents that foreign companies can be taxed following the same tax principles applicable to local companies.

Companies, as well as natural persons, have to submit tax returns in a given period of time. The institution that handles tax matters here is the Spanish Tax Agency. Tax returns in Spain have to submitted following the rules imposed by the financial year, which coincides with the calendar year.

A company is allowed to pay installments on the corporate income tax in Spain in the months of April, October and December, while the overall calculation of the income tax, for the entire financial year, can be done in maximum six months and 25 days after the end of the accounting period.

Businessmen can find out more details on how to submit the tax returns, as well as on other accounting obligations of company, from our team of lawyers in Spain. Please contact our Spanish law firm for professional advice on the accounting procedures imposed to local businesses, the tax regulations applicable to natural persons and legal entities, as well as on any other matter that can be of interest for those who are tax residents in Spain.