Ten questions on Spanish corporation tax

Warning: The information set out below is a general guideline provided by DOMENECH ABOGADOS. Specific advice should be sought before any action in reliance on it is taken, as explained more fully in this website's legal notice.

1. What is the rate of Spanish corporation tax?

The general rate is 30%. But a lower 25% rate for a taxable base up to €300,000, and even 20% in some cases, may apply to small companies.

2. Which companies are considered to be “small” and may be entitled to apply that lower rate?

Companies with a net turnover during tax years 2008, 2010, 2011, 2012 and 2013 below €5 million and which have an average staff during such years below 25 employees. For newly incorporated companies, when the activity during the first year runs for a period of less than 12 months, the limit will have to be determined by grossing-up results obtained.

3. Are there any other tax incentives for small companies?

There are a few, the most important being free or accelerated amortisation of certain investments and the possibility of treating as an expense a sum equivalent to 1% of  the debtors’ account (covering the risk of eventual bad debts). This is in addition to the specific provision allowed for actual bad debts, which have to be excluded in making the above calculation.

4. What does “net turnover” mean?

Very broadly, the difference between the amounts invoiced for sales/services in the ordinary course of business less returns and discounts. 

5. What is the usual financial year for a Spanish company?

The financial year – which can’t exceed 12 months - usually coincides with the calendar year. If you’re interested in a different period (eg, because you want to match a parent company’s financial year, for instance), this must be clearly specified in the Spanish company’s articles.

6. When must the Spanish corporation tax return be filed and the tax paid?

Within 25 calendar days from the date falling sixth months after the end of the company’s financial year. Since, as explained above, most Spanish companies’ financial years run 1 January to 31 December, this means that the corporation tax return for a given year will usually have to be filed (and the resulting tax paid) within the period  1 July to 25 July in the following year.

7. What does approving the accounts involve?

The shareholders must hold a meeting, within six months following the end of the company’s financial year, to approve or reject the accounts and decide upon the distribution of profits, if any.  

8. Does the company need to pay any amount in advance on account of its corporation tax liability?

Yes, three advance payments are required - in April, October and December

9. How are these advance payments calculated?

Generally, as 18% of the tax quota (net of certain reductions) of the former financial year for which the deadline for filing corporation tax returns has expired on the first day of either April, October or December. But there are also specific rules for specific cases. 

10. Is this the only alternative for the calculation of advance payments?

No. The company may opt for a different system of calculation, consisting of applying a percentage on the taxable base obtained during the relevant first 3, 9 or 11 months of the current calendar year (as long as the financial year coincides with the calendar year, since otherwise special rules apply). But this requires a written election to be made and filed in each year you want to use this alternative. Note, this alternative method of calculation is compulsory for companies whose turnovers exceed certain limits for VAT purposes.

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