Taxation of Foreign Companies in Spain

The taxation system in Spain was changed starting 1st of January 2015, after the new tax reform came into force in order to encourage the investments in the local economy that was seriously affected by the economic crises. The Spanish government introduced a new corporate income tax law and changed the personal and nonresident income tax and also the VAT, measures that have an important impact on the foreign investments in Spain.

The standard corporate income tax was reduced from 30% to 28% (rate that is valid during 2015) and 25% (starting 2016).

The authorities also decided to eliminate a few tax credits, such as environmental investment credit, profit investment credit and the reinvestment credit, and introduce a capitalization reserve instead of these. The capitalization reserve allows a tax deduction for 10% of the increase in net equity in a tax year under certain conditions. If you are interested in finding out more about the new measures of the local authorities, you may contact our law firm in Spain.

The taxation for nonresidents

A nonresident citizen, who has a permanent establishment in Spain, had to pay a standard income tax of 24.75%, but for certain types of incomes (from dividends, interest and capital gains) there was a withholding tax rate of 21%. According to the tax reform, starting 2015, the standard income tax rate has decreased to 20% and it will be even lower - 19% - as from 2016. These rates are applied for foreign residents from the EU and EEA regions, but the other residents will pay the same rate – 24%.

The withholding tax rate on dividends, interest and capital gains was reduced to 20% during this year (2015) and it will decrease to 19% in 2016.

Other changes to the taxation system in Spain affect: the VAT, the taxation applied in the Canary Island, the environmental taxes, excise taxes etc.

If you need to find out more details about the changes of the taxation system in this country, you may contact our lawyers in Spain who provide legal assistance and financial advice for foreign investors.