Spain country tax guide

1. Languages used by the local tax authorities

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

2. Main corporation tax characteristics

2.1 Corporate tax rate/additional taxes / global aggregate rate

Spanish companies are taxed in Spain by Corporate Income Tax at a general 25% tax rate. Taxable base will be based on the profit and loss result with certain tax adjustments established by tax laws provisions.

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

On the other hand, new established entities 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) 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.

Finally, REITs will be taxed, in general terms, at a 0% tax rate. However, their non-distributed profits will be taxed at 15%.

Corporate wealth tax

Spain does not have a corporate wealth tax.

2.2 Specific tax regime for dividends /interest/ capital gains

Dividends are subject to Spanish Corporate Income Tax at the normal 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; 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).

 

3. Main personal income tax characteristics

3.1 Personal Income Tax rate / additional taxes / global aggregate rate

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 centre 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 19% to 50%.

3.2 Capital gains, interests and dividends (amongst other income) will be taxed at the saving base 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.
  • 26% for amounts obtained exceeding EUR 200,000.

3.3 Beneficial regimes

Impatriates

This regime benefits to employees and directors moved to Spain. The key conditions to benefit from the regime are:

  • Acquiring Spanish tax residence;
  • Not being tax resident in Spain during the prior ten 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.

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 income which would be taxed on a worldwide base (i.e., eventual labour income obtained abroad will be also taxed in Spain).
  • he 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 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.
    • 26% for amounts obtained exceeding EUR 200,000.
    • 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. 

In this regard, certain amendments to the impatriates tax regime are foreseen in a draft bill published in December 2021 (which has not yet been approved). In a nutshell, the main modifications proposed are the following:

  • the minimum period of not being tax resident in Spain before applying said regime will be reduced from ten to five years;
  • The regime could be applied by employees providing services on a teleworking basis under certain circumstances; and,
  • 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.

3.4 Spanish Net Wealth Tax

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.

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).

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:

Taxable baseTax rates
Up to EUR 167,129.450.2%
From EUR 167,129.46 to EUR 334,252,880.3%
From EUR 334,252,89 to EUR 668,499.750.5%
From EUR 668,499.76 to EUR 1,336,999.510.9%
From EUR 1,336,999.52 to EUR 2,673,999.021.3%
From 2,673,999.02 to EUR 5,347,998.031.7%
From EUR 5,347,998.04 to EUR 10,695,996.062.1%
More than EUR 10,695,996.062.5%

 

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.

3.6 Gift and Inheritance tax rates

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.

4. Visas and residence permits

4.1 Golden visa or equivalent regime?

Yes, Golden Visa could be obtained in Spain.

Capacity to have a residence permit for HNWI?

n.a.

4.3 Ability to travel to the European-Union?

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. These rules can be currently modified due to the specific provisions taken to face the Covid-19 pandemic.

5. Trusts/foundations/Fiducies/Treuhands/Stiftungen

5.1 Are these vehicles used/recognised in your jurisdiction?

Trusts and similar foreign structures are not recognised.

5.2 Are these vehicles subject to a disadvantageous tax regime in your jurisdiction?

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