Law & Numbers - News Tax

Tax rates for Spanish corporate income tax

21.04.2014 (Spain)

The Corporate Tax is the third most important tax in Spain after the Personal Income Tax and the VAT, taking into account the incomes collected by the State.

This tax, as in many other countries, levies directly the corporate profit of the companies.

In Spain the standard tax rate used to be of 35%, applicable to the incomes of the companies. Nevertheless, since 2007 the standard rate was reduced to 30%.

After the global economic crisis started to aggravate the situation of the companies in Spain a few years ago, the Spanish government implemented different measures to decrease the Corporate tax rate in specific situations, specially in small and medium enterprises (SMEs):

I. On January 1st, 2011, a decrease in the tax rate entered into force for companies with an average workforce of less than 25 employees if they sustain this average with more than one unit in the following 12 months and if it is not lower than during the first year of the company after 2009, which is as follows:

a. for Small Enterprises –turnover under 5 millions of EUROS-

i. 20% for the first 300.000¤ of the tax base, and
ii. 25% for the rest

b. for Medium Enterprises –turnover between 5 and 10 millions of EUROS- ,

i. 25% for the first 300.000¤ of the tax base, and
ii. 30% for the rest

II. On July 26th, 2013, a new rate was passed for the new companies created since January 1st of 2013: for its first period with a positive tax base and the following one, of:

a. 15% for the first 300.000¤,
b. 20% for the rest

The objective of these tax rates was to palliate the hard situation in the smallest companies: unfortunately, according to the data collected by the Tax Agency in Spain, the incomes from the Corporate Income Tax have been decreasing since 2007.

In this sense, the last report presented last February by the Commission of Experts to reform the Spanish Tax System, better known in the media as “Commission Lagares”, recommended the elimination of this tax rates system.

The Spanish government has denied its intention to eliminate this tax rate system. However, it would not be strange to see any change happen in this substantial matter in the short or medium term, so we recommend staying aware of what is going to happen and taking advantage of these favorable rates now that it is still possible.

Written by Mauricio Ticó, tax advisor in Adarve Abogados.

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