Understanding Spain’s corporate tax landscape is critical to maximizing the benefits of your investment. This article will provide you with the essential knowledge to help you navigate tax obligations and effectively exploit opportunities.

Whether you are starting a new business, expanding an existing one, or exploring Spain’s potential, our legal expertise will help you make strategic, informed investment decisions.

What is Corporate Tax (IS)?

Corporate Tax (IS) applies to companies and other entities that are tax residents in Spain and are taxed on their income worldwide. A company is considered resident in Spain for tax purposes if it has been formed under Spanish law, has its registered office or its effective management office in Spain.

• In Spain, the general corporate tax rate is 25%.
• Corporate Tax includes different tax incentives for investing, particularly in R&D and technological innovation.  There are also tax credits to avoid domestic and international double taxation and an exemption system for dividends and capital gains from foreign sources.
• Accountable expenses are deductible, with some exceptions. Non-deductible expenses include dividends, gratuities and fines or sanctions.
• Amortization of fixed assets is a tax-deductible expense as long as it is effective and accountable.
• Capital gains, income derived from the transfer of assets, is considered income and taxed at the rate applied to other income.
• If the resulting tax base is positive, it can be offset by negative tax bases from previous tax periods. 

Know more about taxes in Spain.

Who pays Corporate Tax in Spain?

The obligation to pay corporate tax extends across various types of companies:

• Limited Companies (Sociedades Limitadas): These entities are subject to corporate tax on their profits and are one of the most common forms of business structures in Spain.
• Public Limited Companies (Sociedades Anónimas): Similar to limited companies, these larger entities must also pay corporate tax on their income.
• Partnerships (Sociedades Colectivas): While partnerships are less common, they too have a corporate tax liability on the income earned by the entity.
• Cooperative Societies (Sociedades Cooperativas): These member-owned businesses have a unique set of rules but are still required to pay corporate tax.
• Branches of Foreign Companies: Branches operating in Spain are treated as permanent establishments and must pay corporate tax on the income attributable to their activities in Spain.

Spain’s corporate tax rate in 2024

As of 2024, Spain’s corporate tax rate remains a key component within the national taxation system, primarily levied at a standard rate of 25% on resident companies’ worldwide income. However, there are nuances to this rate depending on the size and type of business.

For instance, companies with a turnover less than EUR 1 million are subject to a reduced tax rate of 23%. Newly established companies benefit from an even lower rate of 15% for the first two profitable fiscal years, under certain conditions.

The corporate tax landscape in Spain is diverse, with different rates applied to various entities:

• Standard corporate entities: 25%
• Entities with turnover less than EUR 1 million: 23%
• Newly created companies (for the first two profitable fiscal years): 15%
• Banks and credit institutions: 30%
• Tax-protected cooperatives: 20%
• Entrepreneurs: 15%
• Associations and foundations: 10%
• Canary Islands Special Zone (ZEC) entities: 4%
• Investment companies: 1%
• Spanish REITs (SOCIMIs): 0%

Understanding Spain’s corporate tax system is important for foreign investors looking to maximize their business potential in this strategic European market. By familiarizing yourself with the key aspects of corporate taxation, such as tax rates, taxable income, deductions, compliance requirements and international considerations, you can make informed and strategic investment decisions.

Spain offers various tax incentives and opportunities that can enhance the profitability and sustainability of your business. Utilizing expert legal advice will ensure that you effectively navigate these complexities and position your investment for success in Spain’s thriving business environment.