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Corporate Tax Spain. Updated 2025

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Corporate tax for companies resident in Spain for tax purposes

 
 

Corporate tax (IS) is a tax levied on the income of companies and other corporate structures resident in Spanish territory.

 

This tax is regulated by the following rules:

  • Corporation Tax Law
  • Corporation Tax Regulations

 

1.- Which companies are subject to Spanish corporation tax?

 

There is a general rule according to which all companies are required to file this tax return, regardless of whether they have carried out activities during the tax period (a calendar year) or not, and even if they have not obtained income subject to taxation.

– WHAT HAPPENS TO COMPANIES THAT ARE CONSIDERED “INACTIVE”?

A company is considered “inactive” when it has no economic activity.

In other words, the company has not carried out any operations because:

* It is a newly created company. In other words, it is incorporated but has not yet started its activity.

* Company already established but which has ceased trading. There may be several reasons why the company has ceased trading. The most common reason is that the partners no longer wish to continue the company’s activity, but want to wait to liquidate and dissolve it because they hope it will be reactivated in the future. In this way, the partners avoid the formalities and expenses involved in keeping the company active.

The relevant regulations establish that companies must be liquidated when more than one year has elapsed since they ceased trading. Therefore, once this period has elapsed, they must be liquidated and finally dissolved.

Therefore, inactive companies, when the period of inactivity is too long, can cause problems.

However, even if it is declared “inactive”, the company has certain formal obligations to fulfil:

1.- Keep VAT records: Once the company has been declared “inactive”, it is not required to generate and keep VAT records, as it has ceased to issue and receive invoices. However, it is necessary to keep them because the administration may request their review and control up to four years later.

2.- File corporate tax returns: All types of companies, whether active or inactive, must file corporate tax returns. In the case of inactive companies, they must file this tax return indicating their inactive status, and their accounting result will be ‘0’.

3.- Other obligations: Inactive companies are required to carry out all procedures as if they were active. For example, there is an obligation to keep accounts, legalise the books, etc. There is even an obligation for the directors to prepare the annual accounts, which must be approved by the General Meeting of Shareholders. In addition, it is essential that the annual accounts are filed with the Commercial Registry. Penalties for failure to comply with these obligations can be as high as EUR 60,000.

 

2.- When is a company considered to be ‘resident’ in Spain?

Companies that meet any of the following requirements are considered to be resident in Spanish territory:

  • They have been incorporated in accordance with Spanish law.
  • They have their registered office in Spanish territory.
  • They have their effective centre of management in Spanish territory (when the management and control of all their activities are located in Spain).
 

– WHAT TYPE OF COMPANIES IS THE TAX APPLICABLE TO?

All companies with net assets, regardless of their legal form, as well as certain entities, even if they do not have legal personality, are subject to corporation tax.

 

3.- What is the Spanish corporate income tax rate?

The taxable base is obtained from the company’s accounting results/balance sheet. Therefore, it is this accounting balance to which the tax rate will be applied.

– TAX RATES

It will be applied in the first tax period in which the taxable base is positive (i.e. there are profits and we have to pay corporation tax) and in the following period.

  • General rate: 25%.
  • Reduced rate of 15% for entrepreneurs. Newly created companies can benefit from this reduced rate for TWO YEARS (the year in which the activity begins and the following year) if they meet certain requirements:

– The economic activity of the company has not been carried out previously by other related persons or entities.

– The economic activity must not have been carried out during the year prior to the incorporation of the entity by a natural person who has a direct or indirect stake of more than 50% in the capital or equity of the newly created entity.

Patrimonial companies are excluded from this reduced tax.

  • Reduced rate of 20% for cooperatives: This rate is applicable to tax-protected cooperative companies, except for non-cooperative income, which is taxed at the general rate of 25%.
 
 

4.- How is Spanish corporation tax paid?

 

Corporation tax is calculated on the basis of the company’s accounting results for the fiscal year, i.e.:

Income – Expenses – Deductible expenses

There is a long list of expenses related to the development of the activity that are deductible, such as purchases, services, wages and salaries, social security, rents, repairs, insurance, travel and transport, advertising, financial expenses, supplies, commercial representation expenses, and many more.

For an expense to be considered ‘deductible’, it must correspond to a ‘real economic event’, i.e. the accounting entry must correspond to a transaction that has actually taken place and is not simulated.

In addition, expenses must meet the following requirements:

  • Accounting: they must be recorded in the profit and loss account or in a reserve account, except in the case of items that can be freely amortised and other cases where the regulations expressly state that they do not need to be recorded.
  • Justification: they must be justified by an invoice that meets the requirements established by the Invoicing Regulations in both cases.
  • Allocation: in general, they must be allocated to the tax period in which they are accrued. The rule includes two exceptions that allow income and expenses to be allocated for tax purposes in the tax period in which they were recorded, provided that this does not result in a lower tax rate than would have been applicable if they had been allocated in the period in which they were accrued.
  • Correlation with income: they must be made in the course of the activity for the purpose of obtaining income, without being considered gifts, in which case they would not be deductible.
 

Conclusion

For the purposes of Corporation Tax, only expenses that meet the following criteria are deductible:

  • They have been correctly recorded in the accounts.
  • They correspond to ‘real’ activities.
  • They have been incurred during the accounting period.
  • Are duly justified
  • Are not expressly considered ‘non-deductible’ expenses.

 

As for expenses that are expressly considered ‘non-deductible’, i.e. those that the law itself does not allow to be deducted from the amount payable for tax purposes, these are as follows:

  1. Those representing remuneration of own funds.
  2. Those arising from the accounting of corporation tax. That is, the amount paid for such tax.
  3. Criminal and administrative fines and penalties, and surcharges for late filing of returns.
  4. Losses from gambling.
  5. Donations
  6. Expenses for acts contrary to the legal system.
  7. Expenses corresponding to transactions carried out with persons or entities resident in tax havens.
  8. Financial expenses accrued during the tax period, arising from debts with group entities.
  9. Disproportionate expenses arising from the termination of an employment or commercial relationship that exceed certain limits.
  10. Expenses corresponding to transactions carried out with related persons or entities which, as a result of a different tax classification, do not generate income or generate income that is exempt or subject to a nominal tax rate of less than 10%.
 
 

5.- Allocations in the calculation of Spanish corporation tax

 

To calculate the amount of tax payable, a series of corrections or adjustments must be made due to the use of calculation criteria other than those permitted by the tax authorities in accounting.

At this point, we must be clear about the concepts of ‘accounting criteria’ and ‘tax criteria’, as well as ‘accounting close’ and ‘tax close’ for the financial year.

These corrections or adjustments can be either POSITIVE or NEGATIVE, and may be motivated by TEMPORARY or PERMANENT differences.

A clear example would be the payment of a TRAFFIC FINE. This expense is recorded in the accounts because it has been paid by the company. However, we CANNOT deduct it from the tax payment because it is considered a ‘non-deductible’ expense.

The accounting profit/balance will have to add and subtract the permanent differences between the accounting profit and the taxable profit.

 

6.- What are ‘related parties’ in Spanish corporation tax?

 

These are transfers of goods and/or services between related parties (not independent of each other).

The Corporation Tax Law establishes the following cases of related parties:

  1. When they are made between the Entity and its partners, when the participation of these partners in the company is at least 25%.
  2. When they are made between the Entity and its directors or managers
  3. When they are made between the Entity and relatives up to the third degree of consanguinity (spouse, children, parents, siblings, grandchildren, grandparents, nephews, nieces, etc.) of the partners (minimum shareholding of 25%), directors or managers.
  4. When they are made between Entities belonging to the same group of companies.
  5. When they are made between the Entity and the directors or managers of another company that is part of the same group of companies.
  6. When they are made between the Entity and another company in which the former indirectly owns at least 25%.
  7. When they are carried out with entities in which the same partners, directors, administrators or their relatives up to the third degree have at least a 25% stake.
  8. When they are carried out between the entity resident in Spain and its permanent establishments abroad.
 

IMPORTANT: Transactions between related persons or entities shall be valued at their ‘normal market value’. Normal market value shall be understood to be the value that would have been agreed upon by independent persons or entities under conditions of free competition.

 

7.- Form 202 – Spanish Corporation Tax

 
  • Form 200: Annual corporate income tax return. It must be filed between 1 and 25 July each year. It must also be filed if the company is inactive.
  • Form 202: Corporate tax instalment payment return. Must be filed if any profit was made in the previous year. It must be filed within the first 20 days of April, October and December.
  • Form 220: This form is used for groups of companies.
  •  

Taxes for non-resident companies – Income tax

 

a) Income obtained through a permanent establishment

 

A non-resident individual or legal entity acts in Spain through a ‘permanent establishment’ in the following cases:

– When they have facilities or workplaces of any kind in Spain, under any title and on a continuous or periodic basis, where all or part of their activity is carried out.

– When they act in Spain through an authorised representative, who contracts on behalf of and for the non-resident entity, provided that they habitually exercise this power.

Specifically, permanent establishments are considered to be head offices, branches, offices, factories, workshops, warehouses, shops or other establishments such as mines, oil or gas wells, quarries, agricultural, forestry or livestock farms or any other place of exploitation or extraction of natural resources and construction. Also, installation or assembly work lasting more than six months.


EXAMPLE

A foreign-resident entity owns land intended for mining in Spain.

1.- Taxable base

The taxable base for permanent establishment tax shall be determined in accordance with the provisions of the General Corporate Tax Regime, without prejudice to the following:

– Not all payments made by the permanent establishment to its head office or any of its permanent establishments in respect of fees, interest or commissions paid in consideration for technical assistance services or for the use or transfer of assets or rights shall be deductible.

– However, interest paid by permanent establishments of foreign banks to their head office or other permanent establishments for the purpose of carrying on their business shall be deductible.

– A reasonable portion of the general administrative and management expenses of the permanent establishment shall be deductible, provided that the requirements established by law are met. Taxpayers may request the Tax Administration to determine the valuation of the aforementioned deductible expenses.

– Under no circumstances shall the amounts corresponding to the cost of the entity’s own capital (interest and other financial expenses) be allocated to the permanent establishment, either directly or indirectly.

2.- Tax rate

The tax rate of 25% shall be applied to the taxable base.

A supplementary rate of 19% shall be applied to the amounts transferred from the income obtained in Spain by the permanent establishment, with the following exceptions

– Entities with tax residence in European Union Member States that are not considered tax havens.

– Entities with tax residence in a State that has signed a double taxation agreement with Spain, provided that reciprocal treatment exists.

The following may be applied to the full amount of the tax:

– The amount of profits and deductions applicable under the Corporation Tax Law to companies resident in Spain.

– The amount of withholdings and payments on account of the tax.

3.- Tax period and accrual

The tax period shall coincide with the fiscal year declared by the permanent establishment, without exceeding 12 months. In the absence of a declaration, the tax period shall be understood to refer to the calendar year. The tax shall accrue on the last day of the tax period.

The tax period must be notified at the time when the first tax return for this tax is due, and it shall be understood to remain unchanged for subsequent periods unless expressly modified.

The tax period shall be deemed to have ended when the permanent establishment ceases its activity or, in other cases, when the investment in the permanent establishment is reversed, as well as in cases where the permanent establishment is transferred to another natural or legal person, where the head office transfers its registered office and when its owner dies.

4.- Formal obligations

Permanent establishments shall be required to file a return, determining and paying the corresponding tax rate, using the simplified Form 200 or 201. The return shall be filed within 25 calendar days following the six months after the end of the tax period.

Permanent establishments shall be required to keep separate accounts for the transactions they carry out and the assets assigned to them.

They shall also be required to comply with all other accounting, registration and formal obligations required of entities resident in Spanish territory under corporate income tax regulations.

5.- Payments on account

Permanent establishments shall be subject to the corporate income tax withholding regime on the income they obtain, and shall be required to make payments on account towards the settlement of this tax, under the same terms as entities subject to Spanish corporate income tax.

They shall also be required to make withholdings and payments on account under the same terms as entities resident in Spanish territory.

 


b) Income obtained without the mediation of a permanent establishment

 
Taxpayers, companies and/or individuals operating without a permanent establishment, whether natural or legal persons, are taxed in accordance with the regulations on personal income tax
(Personal Income Tax – Capital Gains Tax)
, and do so for each transaction, as established in Articles 24 et seq. of the Consolidated Text of the IRNR Law.
 

1.- Taxable base

a) General rule: In general, the taxable base shall consist of the full amount, determined in accordance with the rules on personal income tax.

b) Special rules: In the case of the provision of services, technical assistance, installation or assembly work arising from engineering contracts and, in general, economic activities or operations carried out in Spain without the mediation of a permanent establishment, the taxable base shall be equal to the difference between the gross income and the following expenses:

– The salaries and social security contributions of personnel directly employed in the performance of the activity, provided that the payment of the corresponding tax or payments on account of income from employment is justified or guaranteed.

– The supply of materials for permanent incorporation into the works carried out in Spanish territory.

– Supplies consumed in Spanish territory for the performance of the activities.

The taxable base for capital gains shall be determined by applying the rules laid down for personal income tax to each change in net worth, with certain exceptions.

– In the case of non-resident entities, when the capital gain arises from a non-lucrative acquisition (e.g. a donation), the amount shall be valued at the ‘normal market value’ of the asset acquired.

– When the gains derive indirectly from assets located in Spanish territory, or from rights over them, and the entities are considered ‘mere holders of assets’ and are resident in countries or territories with which there is no effective exchange of tax information, the real estate located in Spanish territory shall be subject to the payment of the tax.

– In the case of non-resident individuals, the taxable income from real estate located in Spanish territory shall be determined in accordance with the provisions of the Personal Income Tax Law (2% of the cadastral value of urban or rural real estate with buildings not essential for the exercise of any activity, not related to economic activities or generating real estate income, or 1.1% if the cadastral value has been revised).

– Taxpayers resident in another Member State of the European Union are subject to specific regulations that allow them to apply their own special rules, such as:

*The expenses provided for in the Personal Income Tax Law may be deducted, as if they were residents, provided that they are directly related to the income obtained in Spain.

*The taxable base for capital gains will be determined by applying, to each change in net worth that occurs, in general, the rules of the Personal Income Tax Law that would apply if the taxpayer were liable for that tax.

 

2.- Tax rate

* General:

Residents in the EU, Iceland and Norway Other countries
19%24%

* Income from work received by individuals not resident in Spanish territory under a temporary seasonal employment contract, in accordance with the provisions of labour regulations: 2%.

* Dividends and other income derived from participation in the share capital of an entity, and interest and other income obtained from the transfer of own capital to third parties: 19%

 

3.- Deductions

Only the following shall be deducted from the tax:

The amounts corresponding to deductions for donations under the terms provided for in Article 68.3 of the Consolidated Text of the Personal Income Tax Law.

Withholdings and payments on account made on the taxpayer’s income.

 

4.- Accrual

The tax shall accrue:

– In the case of returns, when it is due or on the date of collection, if earlier.

– In the case of capital gains, when the change in capital occurs.

– In the case of income attributed to urban real estate, on 31 December of each year.

– In all other cases, when the corresponding income is due.

– In the event of the taxpayer’s death, all income pending attribution shall be considered due on the date of death.

 

5.- Formal obligations

Taxpayers who obtain income in Spanish territory without the mediation of a permanent establishment shall be required to file a return, determining and recording the tax liability corresponding to this tax within one month from the date of accrual. In the case of income attributable to urban real estate for personal use, the return shall be filed between 1 January and 30 June following the date of accrual.

Jointly and severally liable parties may also file the return and deposit the debt. Taxpayers of this tax shall not be required to file a return for income on which a withholding or payment on account has been made, or for income subject to withholding or payment on account but exempt.

Taxpayers who obtain income from economic activities or operations carried out in Spain shall be required to keep records of income and expenses.

They must also keep the invoices issued and the invoices or supporting documents received, numbered in chronological order.

They are obliged to make withholdings and payments on account in respect of the income from work they pay, as well as other income subject to withholding.

Contact us for corporate advice in Spain.

  • Setting up a business structure in Spain as a resident/non-resident

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