Spain country tax guide

Foreign documents should be translated into Spanish when provided to the Spanish Tax Authorities. In some cases, Spanish Tax Authorities have accepted some documentation (e.g., transfer pricing documentation) in English. 

Spanish companies are taxed in Spain by Corporate Income Tax at a general 25% tax rate. Nevertheless, companies with a net turnover under EUR 1 million could apply a reduced tax rates of 17% (for the tax base from 0 to EUR 50,000) and 20% (for the rest of the tax base up to EUR 1 million). In addition, companies subject to the reduced dimension companies tax regime (generally, with a net turnover up to EUR 10 million), could a apply a 20% tax rate.

Banks and similar financial entities will be taxed at a 30% tax rate.

On the other hand, new established entities (not forming part of a mercantile group) could apply a 15% tax rate during the first year when its taxable base is positive and the following one.

Taxpayers with a net turnover exceeding EUR 20m in the 12 months prior to the start of the fiscal year or forming part of a tax consolidation group (regardless its turnover) should pay a minimum tax due of at least equivalent to 15% (18% in case of financial entities and 10% in case of new-created entities as defined above) of its taxable base.

Concerning Funds and UCITs they are subject, in general terms, to a 1% tax rate. However, additional requirements have been requested from UCITs in order to apply said reduced rate. REITs will be taxed, in general terms, at a 0% tax rate. However, their non-distributed profits will be taxed at 15% under certain circumstances

Finally, for 2024 and subsequent fiscal years, Spain has approved the internal law implementing the Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (“Pilar 2”).

Spain does not have a corporate wealth tax.

Dividends are subject to Spanish Corporate Income Tax at the general rate (25%) except in the following cases:

• Parent company regime: dividends received by Spanish parent companies (i.e., companies  incorporated in Spain and holding qualifying shares that represent at least 5% of the stake of a subsidiary during, at least, one year) are exempt from Corporate Income Tax. In case of foreign subsidiaries, they should be subject to and non exempt from an identical or similar tax to the Spanish Corporate Income Tax (personal and direct tax), at a nominal tax rate of at least 10% (this requirement would be deemed to be automatically met if Spain has signed a double tax treaty with the other jurisdiction concerned). 5% of the dividends net amount must be added back to the parent company’s taxable results. Therefore, the effective tax rate on such dividends is 1.25%.
• Consolidated group regime: dividends received by a Spanish company from a member of a consolidated group are not subject to Corporate Income Tax; 5% of the dividends net amount must be added back to the company’s taxable results. Therefore, the effective tax rate on such dividends is 1.25%.

Capital gains derived from the sale of fixed assets by Spanish companies are subject to Corporate Income Tax at the standard rate of 25%.

Capital gains derived from the sale of qualifying shares (i.e., 5% of subsidiary’s stake at the latest) that have been held for at least one year, are exempt from Spanish Corporate Income Tax if, among other requirements, the subsidiary is not considered as a passive entity; 5% of such gain must be added back to the parent company’s taxable results. Therefore, the effective tax rate on such gain is 1.25%.

Net financial expenses are generally deductible for Spanish Corporate Income Tax purposes up to a limit of 30% of the adjusted EBITDA. 

Notwithstanding the above, a minimum cap amounting to EUR 1m per year could be deducted in any case (except if the fiscal year is shorter than a calendar year, in which case it should be apportioned). 

Net financial expenses that are not deductible because of exceeding the 30% limit on the EBITDA may be deducted in the following tax periods without any time limit. Additionally, if they fall below the 30% ceiling and the corresponding basis for additional deduction of interest expenses remains unused over the corresponding tax year, that difference will increase the ceiling of the deductible financial expenses over the subsequent five fiscal years.

Under the Spanish Corporate Income Tax consolidation group regime, this deductibility limitation of the 30% of the operating profit is calculated at the level of the group, and not individually for each of the companies (i.e., both the net financial expenses and the operating profit of the group must be considered). 

In addition, only EUR 1m would apply as minimum threshold, regardless of the number of entities in the tax group.

Other limitations to the deductibility of financial expenses could arise under certain circumstances (e.g., anti-LBO rules).

Transactions between related parties shall comply with the arm’s length principle. Tax formalities and transfer pricing documentation will be filed/prepared if certain thresholds are exceeded.

Spanish Personal Income Tax relies on the concept of residence. An individual is considered a resident for tax purposes in Spain when he/she:

• spends more than 183 days in Spain during one calendar year; or,
• has his/her center of economic interests in Spain.

Additionally, in the absence of proof to the contrary, an individual is deemed to be a resident of Spain if the permanent home of his/her spouse and dependent minor children are in Spain.

Subject to double tax treaties’ provisions, Spanish tax residents are liable to Spanish Personal Income Tax on their worldwide income whereas non-residents are liable only on their Spanish source income.

Regarding Personal Income Tax taxpayers, general income (labour remuneration, professional activity, etc.) will be taxed at the progressive scale ranging from 18% to 54%.

• 19% for the first EUR 6,000.
• 21% for amounts obtained between EUR 6,000.01 and EUR 50,000.
• 23% for amounts between EUR 50,000.01 and EUR 200,000.
• 27% for amounts between EUR 200,000.01 and EUR 300,000.
• 30% for amounts obtained exceeding EUR 300,000.

Impatriates

This regime benefits to employees, directors, digital nomads and individuals who develop an entrepreneurial or a high-qualification business activity moved to Spain. The key conditions to benefit from the regime are (amongst others)::

• Acquiring Spanish tax residence;
• Not being tax resident in Spain during the prior five years; and,
• The displacement to Spain should derive from an employment agreement; or, due to the procurement of the position of member of a board of directors in a (non-related) Spanish company; or, due to the develop of a entrepreneurial or a high-qualification business activity; or, due to the undertaking of an innovative economic activity.

The main implications related to the quantification of the tax due by the individuals that apply said regime are detailed below:

• Impatriates will only be taxed by the income obtained in the Spanish territory, with the exception of employment and entrepreneurial activities income which would be taxed on a worldwide base (i.e., eventual labour income obtained abroad will be also taxed in Spain).
• The applicable tax rate to the income obtained would be, in general, 24% to the first EUR 600,000 of the taxable base and 47% as of such threshold (with the exceptions mentioned in the following point). 
• Interests, dividends and capital gains derived from the transmission of assets and rights located in Spain would be taxed at the following tax rates:
  • 19% for the first EUR 6,000.
  • 21% for amounts obtained between EUR 6,000.01 and EUR 50,000.
  • 23% for amounts between EUR 50,000.01 and EUR 200,000.
  • 27% for amounts between EUR 200,000.01 and EUR 300,000.
  • 30% for amounts obtained exceeding EUR 300,000.

Tax exemptions on certain income and reductions, would not be applicable.

Impatriates will be taxed by Spanish Net Wealth Tax only regarding the assets located or that could be executed in the Spanish territory (real obligation).

The regime is applicable during a period of five years following the year when the Spanish residence is acquired (six years in total). 

The same regime could be applied by taxpayer’s spouses, and children under 25 years of age or children of any age with disabilities.

Expatriates

Employees working abroad and which are Spanish tax residents can benefit from an exemption on the compensation they receive for their activity performed outside of Spain when certain requirements are met. Said exemption is limited to EUR 60,100 per year.

Non-resident individuals would be subject to Spanish Net Wealth Tax only for the assets located or that can be executed in Spain, whilst Spanish tax residents would be taxed on their worldwide wealth (i.e., real obligation versus personal obligation).

Spanish Net Wealth Tax is an annual tax payable on the total net value of taxable assets on 31 December of each fiscal year.

This tax has been transferred from the Government to the different Spanish Autonomous Regions, which have approved the corresponding regional laws in this regard. Therefore, the tax rates and eventual tax reliefs of the Spanish Net Wealth Tax, would depend on the Autonomous Region in which the individual habitually resides (for example, Madrid has a 100% tax due relief).

Notwithstanding the above, each resident individual has a tax-free allowance of EUR 700,000 (as stated above, this tax-free allowance could vary depending on the Spanish Autonomous Region in which the individual habitually resides). An additional, EUR 300,000 tax-free allowance will exist if the taxpayer has an habitual abode.

Please note that the obligation to file the corresponding Spanish Net Wealth Tax return would only be applicable, in general terms, for (i) individuals who are required to make a tax payment and (ii) individuals with rights and assets valued over EUR 2m, even if they are not required to make any tax payment. 

The tax rates, for those cases when the corresponding Autonomous Region does not approve specific tax rates, are the following:

Finally, a limit is established per which the aggregate sum of Spanish Personal Income Tax and Net Wealth Tax due by a Spanish taxpayer may not exceed 60% of his/ her total taxable income for Spanish Personal Income Tax purposes. If it exceeds this amount, the taxpayer may reduce his/ her Spanish Net Wealth Tax liability by the excess amount. However, a minimum tax of 20% of the Net Wealth Tax liability, as originally calculated (before the application of the 60% rule) must be paid.

Complementary and alternative to the Net Wealth Tax, the Solidarity Tax on Relevant Fortunes is applied with the aim of trigger tax on all high-net-worth individuals that do not pay Net Wealth Tax due to the specific regulations of certain Autonomous Regions (particularly, Madrid and Andalucia).

In the same terms that the Net Wealth Tax, the Spanish residents and non-residents individuals with a net-worth over EUR 3,000,000 will be levied by this tax. In addition, the taxable base is determined in the same way as in the Net Wealth Tax. Finally, the tax Law allows the amount paid in respect of the Net Wealth Tax to be deducted from the Temporary Solidarity Tax on Relevant Fortunes tax quota.

The taxable rate of this tax is the following:

• 1,7% for amounts obtained between EUR 3,000,000 and EUR 5,347,998.03.
• 2,1% for amounts obtained between EUR 5,347,998.04 and EUR 10,695,996.06.
• 3,5% for amounts obtained exceeding EUR 10,695,996.06.

Even though this tax is foreseen for fiscal years 2022 and 2023 only, an extension of the tax beyond 2023 fiscal year have been approved.

The IHT Law establishes that an individual with tax residency in Spain, would be taxed on assets and rights acquired by inheritance or gift, no matter where they are situated (personal obligation).

However, for individuals who are not tax residents in Spain, IHT would apply only to those assets located or rights that can be exercised or executed in Spain (real obligation).

The Spanish IHT is a transferred tax to the regional governments, which could introduce certain reliefs, reductions or tax allowances.

The applicable tax rates will range between 7.65% and 34%. Additionally, multiplying coefficients ranging from 1 to 2.4 should be applied depending on the degree of kinship and the pre-existing wealth.

Golden Visa will be applicable in Spain until April 2025. The Golden Visas granted before this period will remain in force until their termination, but will not be renewed.

After April 2025, no further Golden Visas will be issued in Spain.

n.a.

As Spain belongs to the Schengen Space, Spanish citizen and persons having a Spanish ID number are allowed to travel in the European-Union within a passport or a visa.

Trusts and similar foreign structures are not recognized.

Trusts and similar foreign structures are considered as look-through entities in Spain.