what it is and how it is regulated in Spain

What is corporate tax?

According to  Law 27/2014, of November 27, on Corporate Tax , this tax is defined as a tribute paid by commercial companies and legal entities that taxes their profits during their tax period (which cannot exceed 12 months).

This is of a direct and personal nature, that is, it is based on the income obtained or  taxable base of the taxpayer and its calculation varies according to the particular circumstances of the company. Its payment is annual and periodic.

It should be noted that the tax is calculated based on the company’s accounting, so having an adequate record of your income and expenses is essential if you want to comply with the regulations in force in Spanish territory.

Who must file corporate tax?

According to  Article 7 of Law 27/2014 , the following entities are required to file Corporate Tax in Spain:

• Legal entity, with the exception of civil companies without commercial activity;
• Companies dedicated to agrarian transformation;
• Funds dedicated to investment;
• Temporary groupings of companies;
• Venture capital funds and closed-end mutual funds;
• Pension funds;
• Mortgage market regulatory funds;
• Securitization funds;
• Investment guarantee funds;
• Communities that manage communal forests;
• Bank asset funds.

The same article mentions that the tax is levied on all profits of companies and legal entities, regardless of their economic capacity or the place where the income is generated or the residence of the payer.

Who is exempt from paying corporate tax?

There are some entities that are not required to pay this type of tax. These are established in Article  9 of Law 27/2014 and are the following:

• The State, an Autonomous Community and local entities;
• The autonomous bodies of the State and public law entities of a similar nature of the Autonomous Communities and local entities;
• The Bank of Spain, the Deposit Guarantee Fund for Credit Institutions and the Investment Guarantee Funds;
• The Managing Entities and Common Services of Social Security;
• The Institute of Spain and the official Royal Academies;
• Institutions of the Autonomous Communities with their own official language that have purposes similar to those of the Royal Spanish Academy;
• The International Public Oversight Board on auditing standards, professional ethics and related matters.

Who is partially exempt from paying corporate tax?

The law establishes that the following entities are partially exempt from paying the tax:

• Non-profit entities and institutions;
• Unions, federations and confederations of cooperatives;
• Professional associations, business associations, official chambers and workers’ unions;
• Employment promotion funds;
• The Mutual Collaborators of Social Security;
• The public law entities Puertos del Estado and those of the autonomous communities.

How corporate tax is calculated

You already know what corporate tax is, so it’s time for you to get more information on how to calculate the tax, which is based on the taxable base defined in  TITLE IV of Law 27/2014 .

Therefore, to determine this base, you must first calculate the difference between the company’s income and expenses during the tax period, which may be mentioned in the company’s bylaws, or may directly end on December 31.

Income = Income – Expenses

There are cases in which the difference obtained has to be corrected or adjusted through extra-accounting procedures. This is due to the difference that may exist between the accounting calculation criteria and that established by the Treasury.

After the adjustment, you will have the previous income or tax base spain email list obtained during the tax period. Negative tax bases from previous tax periods can be subtracted from this amount.

Corporate tax rates

To make the calculation shown above, you need to know the tax rate that which marketing channels make sense for your strategy?  applies to companies or entities with legal personality. The laws establish certain distinctions, so it is sms to data   important that you know which classification you fall under according to the  Tax Agency .

General type

In this sense, the general tax rate is the one applied to the largest number of organizations, among which public limited companies and limited liability companies stand out. This will be 25% of the taxable base of the Corporate Tax.

It also applies to general insurance mutuals, mutual guarantee companies, mutual guarantee reinsurance companies, partially exempt entities and political parties, among others.

Reduced rate and tax benefits

Another option is the reduced tax rate, which is applied to the following commercial companies:

• Small companies : from  1 January 2023, a tax reduction was implemented for companies with profits below one million euros. The percentage applied is 23%.
• Newly created companies : during the company’s first tax period, a tax rate of 15% applies.
• Startups : These are companies with a maximum life of 5 years whose economic activity is innovative and scalable according to the criteria of  Law 28/2022 , known as the Startups Law. The tax rate will also be 15%.
• Tax-protected cooperatives : a percentage of 20% applies to these, although non-cooperative results are classified as a general type.
• Non-profit entities : a tax rate of 10% applies to these entities that comply with the regulations imposed by  Law 49/2002 .
• Investment companies and funds and bank asset funds : finally, a percentage of 1% is applied if certain special conditions are met.

Special types

It should be noted that there are entities that have to pay a higher percentage of corporate tax. These include credit cooperatives, rural banks and credit institutions, which apply a tax rate of 30%.

Corporate tax deductions and bonuses

As we mentioned above, there are some deductions that can be applied when paying the tax. These are tax incentives used by the State to promote certain economic activities in the Spanish territory.

We can mention some incentives such as:

• Deductions for research, development and innovation (R&D&I) : companies that carry out research, development and innovation activities will have certain benefits in their Corporate Tax. In this way, the creation of new technologies that help the country’s growth is encouraged.
• Deductions for job creation : this applies to companies that hire people who belong to certain groups, young people or even people with disabilities.
• Deductions for investments made by port authorities : this deduction encourages the growth of Spanish ports, promoting foreign trade.
• Deduction for investment in fixed assets : incentives are offered here to companies that purchase or update their machinery, so that they can increase their production and competitiveness in the market to which they belong.