Tax Figures
Corporate Income Tax
Taxes are levied in Spain both at the national level (either by the central government or the regions) and at the municipal level (by the municipal authorities). Spanish entities are mainly subject to corporate income tax, branch profits tax and Value added tax (VAT). Other taxes include capital tax, transfer tax, real property tax and miscellaneous levies by the local governments. There are no excess profits or alternative minimum tax. Spain offers a special tax regime for Spanish holding companies (ETVEs).
The current corporate income tax rate is 28%.
A company’s tax period is the same as its fiscal accounting year. The tax period may not exceed 12 months.
Generally, corporations are required to make three advance payments of income tax during the year: in April, October and December at specified rates.
Companies must file a tax return and pay any tax due within the first 25 calendar days after a period of six months following the close of the fiscal year.
Income Tax Rate
Resident individuals are taxed on their worldwide income while non-residents are only taxed on Spanish-sourced income. Individuals are considered Spanish residents for tax purposes if they spend more than 183 days in a calendar year in Spain or if the centre of their vital interests is located in Spain. A presumption of residence arises if an individual’s family lives in Spain. Preferential regimes may apply for individuals who are expatriates.
There are two types of taxable income for Spanish personal income tax purposes: general taxable income and savings taxable income.
Savings taxable income is basically composed of the following:
- Dividends and other income generated from holding interests in companies.
- Interest and other income generated from transferring the taxpayer’s own capital to third parties. As an exception, when capital transferred to a related company exceeds three times the latter’s equity, the interest corresponding to the excess is taxed as general taxable income.
- Income generated from capitalisation transactions and life and disability income insurance.
- Capital gains arising from transfers of assets.
Savings taxable income is taxed at the following rates:
- 19% (20% in 2015) for the first EUR 6,000 of taxable income.
- 21% (22% in 2015) for the following EUR 6,000 to EUR 50,000 of taxable income.
- 23% (24% in 2015) for any amounts over EUR 50,000.
General taxable income includes:
- All income which is not savings taxable income.
- Capital gains not generated from transfers of assets (such as lottery prizes).
- Income allocations, attributions, or imputations, as established by law.
- Interest and other income generated from transferring the taxpayer’s own capital to an associated company when the capital exceeds three times the associated company’s equity and for the part corresponding to the excess.
Income derived by nonresidents is generally subject to a final tax of 24.75%.
For general taxable income, progressive tax rates are applied.The total tax liability consists of the tax liability computed under the general rates plus the tax liability computed under the autonomous community rates. Consequently, the final maximum marginal rate depends on the marginal tax rate of the autonomous community where the taxpayer resides, which may differ from region to region. The general taxable income tax rates for Spanish residents for the year of assessment 2015 is detailed below:
- 0-€12450: 20%
- €12451-20200: 25%
- €202001-35200: 31%
- €35201-60000: 39%
- In excess of €60000: 47%
Payroll Tax
None
Sales Tax
Persons (individual person, partnership, company with share capital or institution, permanent establishments) making taxable supplies of goods and services in Spain (excluding the Canary Islands, Ceuta and Melilla) subject to Spanish Value Added Tax (VAT) regime are required to apply for an Spanish VAT number before commencing business.
The current VAT rate is 21%.
Withholding Tax
Spain imposes withholding tax (WHT) on certain classes of income earned by non-residents:
- Dividends: 20% (to be reduced to 19% in 2016)
- Royalties: 24%
- Interest: 20% (to be 19% in 2016)
A reduced rate may be available under an applicable Double Tax Treaty.
Other Tax
Real estate taxes, transfer taxes, tax on the erection and installation projects and construction work, tax on increase in urban land value whenever land is transferred. For more information on the Spanish tax regime, refer here.
Income Tax (Personal Allowance)
Personal income tax in Spain is progressive, whereby the higher the salary, the higher the rate will be.
Personal situations are also taken into consideration, with dependent children tending to cause the rate of tax to fall, etc.
Companies withhold the respective amounts from gross employee salary each month and pay over to the tax authorities on a quarterly basis (large companies do so monthly).
An annual summary return is also due to be filed in January of each year in relation to the preceding calendar year.
Under certain conditions, employees entering Spain may be entitled to apply for a special tax system with treatment as non-residents. This entails a flat tax rate, however high the salary, and may therefore potentially be very beneficiaL
Time to prepare and Pay Taxes
152 hours
Payroll
Foreign companies operating in Spain may find it challenging to deal with the complexities of the country’s tax system. The primary concerns for a foreign company that needs to comply with tax laws in Spain are: Individual income tax (IIT) for employees in Spain, social security costs, VAT, withholding tax, business tax and permanent establishment concerns.
Remote Payroll
A remote payroll in Spain is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Spain. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in Spain is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in Spain under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Internal Payroll
Larger companies with a commitment to Spain may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete the incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Spanish payroll and can fulfil all tax, withholding tax and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Spanish employment laws.
Setting up payroll in Spain
Currency
Euro €
Employee Information Required
In addition to the details pertaining to the specific employment position, the following details are the minimum needed to set an employee up on the payroll in Spain: First name and surname(s), nationality, country of tax residence, date of birth, national identity document / passport or foreigner’s identity number, social security number, full address, marital status, number of children (with their years of birth), level of studies, and bank account number
Tax Registration Requirements
Resident companies must execute an incorporation deed at a notary’s office and register this at the Companies Register.
Non-resident companies require official registry documentation from their country of origin.
All companies register at the Tax Office, where a Tax Identification Code will be assigned to them.
Social Security Registration
Once the company has a Tax Identification Code, it may apply for a Social Security Contributions Account Code.
This will enable employees to be registered and for social security contributions to be paid on their salaries.
Documentation Required for New Employees
Employees must be given employment contracts on or before their first day of employment.
These contracts must then be registered at the State Employment Office, within ten days as from the start date.
Spanish employment contracts must be permanent unless there are specific and justified reasons for them being temporary.
Payment Mode
Salary is normally paid by bank transfer into the accounts of employees.
Salary must be paid within the period of accrual (generally, by the end of each month).
Frequency of Salary Payment
It is most common for employees to be paid monthly. 13th and 14th payments are also paid occasionally, in addition to the 12 monthly installments. In such cases, the additional payments tend to be paid in June or July, and December.
Invoice / Payslips required
Monthly payslips are provided with a breakdown of salary items. Salary is to be paid within the period of accrual (generally, that is by the end of each calendar month).
Minimum Wage
For 2014, this is €21.51 / day or €645.30 / month (based on 30-day months).
