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Tax Specialist Group
Corporate Tax Guide: Spain
Spain

Members:

The information is valid for the entire country except where indicated. For example, in the case of Malaysia, Labuan is part of Malaysia but has a special tax regime, so this is noted.
  • Spain – entire country.
  • Basque Country and Navarra benefit from special tax arrangements.
The corporate tax rate shown is the typical corporate tax rate that a domestic corporation owned by non-resident persons would pay. The tax rate does not include withholding tax on dividends, but does include a distribution tax shown separately if applicable. Certain countries have a low corporate tax rate, but charge an additional tax when a dividend is distributed. Because this tax is paid by the corporation, and not deducted from the amount of the dividend itself, it is not a dividend withholding tax. As a result, it typically cannot be reduced by an international tax treaty.
General tax rate: 25%
Credit institutions/Hydrocarbons companies: 30%
New entities: 15%
Cooperatives fiscally protected: 20%
Non-profit bodies: 10%
Investment companies and funds/Bank assets funds: 1%
The basis of taxation for a corporation will typically be one of:
  • World income (i.e. income from all sources)
  • Territorial (i.e. only income from within the jurisdiction)
  • Territorial and remittance (income earned within the jurisdiction and income remitted into the jurisdiction)
Other basis of taxation are possible, and, if applicable, they are noted.
Worldwide income.
Where non-resident corporation carries on business in a country, business profits may be subject to corporate tax. In addition, a branch profits tax may apply in lieu of dividend withholding tax. This branch profits tax applies to the after tax profits, typically at a fixed percentage. An international tax treaty may reduce the rate of branch profits tax, typically to the rate provided for dividend withholding.
WHT @ 19%.
General approach: exempt if no special provision within Double Tax treaty (DTT). Exceptions: Sp-US and Sp-Canada DTT.
The common forms of business entity are noted. In addition, the entities which are flow through entities for U.S. tax purposes are indicated.
Limited Liability Company, Joint Stock Companies, "Look-through" Entities.
Capital gains may be fully taxed, partially taxed or not at all. In certain countries, an exemption, called the participation exemption, will apply to exempt from tax a capital gain from disposition of a substantial holding of shares of a subsidiary. Where a participation exemption is applicable, it is noted together with a summary of the main conditions.
Taxable as general company profits. See further participation exemption (under 8. below).
Certain countries allow group taxation, otherwise known as consolidated tax filing. Here the tax returns of a group of corporations in the country may be combined together, which can be useful. If group taxation is permitted, it is noted along with the main conditions.
Optional when at least 75% direct or indirect participation.
Application of the tax consolidation regime to those structures where two Spanish companies have a direct or indirect common non-resident tax shareholder (if not resident in a tax haven) “Horizontal tax consolidation”.
Countries offer various kinds of special exemptions and incentives. Examples are a reduced tax rate, a tax holiday, a tax credit on the purchase of equipment, special accelerated deductions for deprecation, incentives for R&D, and various others. Here the major items are noted.
  • Participation exemption: Exemption on dividends and capital gains arising from qualifying income. Requirements: direct or indirect 5% ownership for at least one year, or > 20.000.000€, subsidiary located in a tax treaty country or subject to at least 10% corporate tax.
  • ETVE (Spanish Holding Company regime): Along with the participation exemption benefits, it provides for exemption of dividends and/or capital gains received/obtained by non-resident shareholder.
  • Canary Islands: Reduced corporate tax of 4%, subject to qualifying requirements.
  • R&D deductions: 25% of R&D expenditure, 17% of payroll expenses related to R&D, 8% of investments on tangible or intangible assets, 12% of expenses within technological innovation activities.
  • Patent Box: 60% reduction of net income resulting from licensing of certain intangible assets (patents, designs and models, plans, secret formulas or processes, know-how). Compatible with R&D and other tax incentives or deductions.
Many countries have thin capitalization rules which limit or deny the deduction of interest expense in certain circumstances. For example, if debt exceeds three times equity, a proportionate amount of interest expense may not be deductible. Limitations take various forms, restricting the interest expense deduction to a percentage of profit, deeming the debt to be equity and the interest to be a payment of dividends, and various other rules which may blend of these principles. Where a country has thin capitalization rules, they are briefly described.
  • Earnings stripping rule: Net financial expenses deductible with the limit of 30& of EBITDA, insofar as those mentioned expenses exceed 1M€.
  • Leveraged acquisitions (LBO): 30% of operating profit of acquiring entity.
Many countries have transfer pricing rules. They very often follow the OECD guidelines and the arms length principle. Some countries have specific rules which apply in certain cases. In addition, some countries allow for a selection of the most appropriate transfer pricing methodology in the circumstances, while other countries follow a hierarchy of methods, with the CUP method (comparable uncontrolled price) often ranking first. The transfer pricing rules are briefly explained.
Yes, mirroring OECD rules and methods. No order of preference. Other methods respecting arm’s length principle allowed.
Master file + local file. Simplified documentation if turnover < 45M€.
Penalties when omitted or misleading documentation. 15% penalty on TP adjustments carried out by Tax Authorities.
Many countries tax passive income earned in controlled foreign corporations (CFC’s) on an imputation basis while active income is not taxed. Such CFC rules are usually complex and vary significantly in what is considered passive income, and how foreign tax paid is taken into account. Some countries approach CFC rules on the basis of whether or not the foreign corporation is resident in a low tax jurisdiction or a tax haven. This may be done through a black list of countries.
The general overview of CFC rules is described in simple terms.
Yes. Apply to Spanish shareholders of foreign entities when direct or indirect participation of 50% or more, and foreign tax paid on income subject to Spanish CFC is less than 75% of the tax calculated in accordance with Spanish tax rules.
  • Taxation according to underlying applicable tax, either individual or corporate.
  • CFC income: closed list, alongside all income obtained by companies with no economic or human capital resources.
Not applicable to EU shareholders if the subsidiary has valid economic reasons and active business activities.
Profits repatriated by way of dividends from a subsidiary to a parent company are typically taxed in one of three ways:
  • The dividends are exempt of tax.
  • The dividends are deductible from taxable income, but not fully (90%, for example, of the dividend is deductible).
  • The dividend is taxable, grossed up to the pre-tax amount, and a foreign tax credit claimed for foreign taxes paid.
The applicable method is noted.
  • Domestic exemption in the case of dividends distributed to an EU parent, subject to fulfilment of certain requirements.
  • ETVE domestic exemption on dividends derived from qualified income from underlying non-resident subsidiaries and paid to a non-resident shareholder (no tax haven).
Most countries allow a foreign tax credit based on a formula, typically net foreign income over the net income times taxes payable. This limits the foreign tax credit to roughly the domestic tax otherwise applicable to the foreign income. There are numerous variations and technical rules in the details of foreign tax credit calculations. Where a foreign tax credit is allowed, the general principles are described.
Domestic tax relief consisting of the lesser of:
  • the actual foreign tax paid on the foreign-source income, by reason of a tax identical or analogous to Spanish corporate income tax.
  • the result of applying the effective Spanish corporate income tax rate to the foreign-source income taxed abroad, as if obtained in Spain.
Certain Double Tax treaties signed by Spain contain specific foreign tax credit reliefs.
14. Losses
Losses typically can be carried forwards for a period of years, and sometimes can be carried back. Losses may be segregated into capital losses and non capital losses.
From 2017: limited to 30% of the operating profit. Excess may be carried forward for the following tax years without temporary limitation. 1M€ safe harbour.
It is not practical to list all of the tax treaties which a country has in a simple guide like this. Accordingly, a link is provided in each case to the tax treaties.
Some countries have entered into Tax Information Exchange Agreements (TIEA).
Treaties are more and more containing provisions that limit benefits (LOB provisions).
Yes.
  • Income Tax Treaties: 88
  • TIEA: 5
  • LOB provisions: 13 tax treaties include LOB.
Withholding tax rates vary considerably from treaty to treaty, and countries may have domestic exemptions applicable in certain circumstances (for example copyright royalties, interest paid to arm’s length persons, etc.). A table shows the typical rates but cannot adequately summarize all of the details. The applicable treaty should be consulted.
TREATYNON-TREATY
Interest5% - 15%19%*
* Exemption to EU residents
Dividends5% - 15%19%*
* Spanish implementation EU Parent/Subsidiary directive 2003/123/EC applicable.
Income Real EstateSource rules – no limits19%
Royalty0% - 15%0%*
* Spanish implementation EU Royalties directive 2003/49/EC applicable.
Some countries allow for the selection of year-end while other countries specify a particular year-end which all business entities must have. Normally the taxation year cannot exceed 12 months. Where it can exceed 12 months, this is noted.
Maximum 12 months. Entities may freely choose the closing date of their taxation period in their bylaws. In case of lack of definition, the taxation year finalizes on 31 December.
This is the due date for filing a tax return. Where extensions are available, this is noted.
25 days following the six-month period after the taxable year.
The typical tax instalment requirements are noted.
Advance payments within the first 20 calendar days of April, October and December.
This is the date when the corporate tax owing for the year must be paid. It may be different from the tax return filing due date.
Annual corporate tax return within the first 25 calendar days of July, leading to either final payment or refund.
This is the period after which the tax department cannot in normal circumstances reassess a taxation year. It is sometimes referenced to the end of the taxation year and sometimes to the date of the first assessment of that taxation year.
  • Tax purposes: 4-year period
  • Criminal context: 5-year period
If a country has exchange controls, this is noted, together with the main requirements.
No. In some scenarios: formalisms and registry obligations (to calculate Spanish balance of payments and to maintain statistical control).
23. VAT
A VAT tax system typically provides that the supply of goods and services is classified as taxable, tax exempt, or zero rated. Where a business is engaged in an activity which is taxable, it must charge VAT on its revenue, and can claim a refund of VAT on its expenditures. Where the activity is exempt, it does not charge VAT on its revenue, and cannot claim back VAT paid. Where the entity is engaged in activities which are zero rated (typically agriculture, food services and exports), then it can claim back VAT which it has paid on its expenditures, and does not charge VAT on its revenue.
If a country has a typical VAT system, this is noted. If a country has no VAT system but a sales tax system, this is indicated. Some countries may have a mixture, and taxes may apply at different levels (federal and state for example).
Yes. Standard rate 21%, reduced rates 10% and 4%.
Stamp duty, or land transfer tax, can apply on such things as the transfer of shares, land, or the issuance of bonds or debentures. This is described together with the applicable rates.
On transfer of shares: generally exempt, unless representing transfer of real estate assets.
On the transfer of land and buildings: 6-10% (depending on the applicable regional transfer tax).
If capital tax is payable, this is described. Capital tax may apply in specialized industries, such as banking and insurance, even if a country does not generally apply a capital tax to corporations.
Formation tax: 0%. Liquidation tax: 1%.
Where significant, other taxes are noted.
Business activity tax, exempt if turnover <1M€. In case of holding properties, annual local taxes and local capital gains tax apply.
Anti-Avoidance Rules take many forms, the most common ones are a general anti-avoidance rule, treaty shopping limitations, the requirement for economic substance (or a business purpose in carrying out transaction) and specific anti-avoidance rules for particular purposes. A very brief overview of the anti-avoidance rules is described.
Spanish GAAR, Substance over form approach:
  • tax fraud
  • simulation
Anti-treaty shopping:
  • Transparency clause (look-through approach) limited to dividends, interest, royalties and capital gains, when no substantial business/commercial/industrial activity is carried out.
  • Exclusion clause to entities benefiting from a privileged tax regime (i.e., Luxembourg 1929 Holding Companies)
Other: Specific anti-avoidance rules. In particular when tax haven countries are involved.
Where a non-resident person holds shares of a corporation established in the country listed, the capital gain which results may be taxable or not taxable depending on the circumstances and, possibly, the existences of an international tax treaty. The general rules are noted.
In case of EU companies or foreign companies when a double tax treaty is applicable, taxation is granted only to the country where the seller of shares resides, unless representing Spanish real estate or having a permanent establishment in Spain.
Where a corporation is acquired through the purchase of shares, sometimes a step up is allowed so that the cost of its assets can be revalued. The main rules are briefly summarized.
Step up available for the target’s assets (land, properties, goodwill, etc.) as opposed to the acquisition of shares.
In some countries, rulings are commonly used (and sometimes even required). In other countries the system is either unavailable or not commonly used except in special circumstances.
Only binding consultations available. They provide for guidance and avoidance of penalties but are subject to potential Spanish tax administration audit.
31. Other
Other important aspects of the tax system are noted.
UBO’s identification: “The individual or individuals who ultimately, directly or indirectly, owns or controls a percentage higher than 25 of the shares or the voting rights of a legal entity, or that through agreements or statutory provisions or otherwise exercise the control, directly or indirectly, of the management of a legal person”. Obliged to be carried out before Spanish Notary.