INTRODUCTION The Spanish taxation system may at first sight appear to be confusing but with the right guidance and advice it is a very ordered process, but unfortunately the underlying government administration can prove to be slow at the best of times.
CONTENTS
CORPORATION TAX REGIME
- Corporation Tax Rates
- Accounting Dates
- Payment of Company Tax
- Capital Gains
- Retentions
EMPLOYEE LEGISLATION AND COSTS
- Social Security.
- Wages.
- Employee Contracts.
NOTE
CORPORATION TAX REGIME
Corporation Tax Rates
The full rate of company tax in Spain is 35%, but for small and medium sized companies, there is a reduced rate of 30% for profits up to 120,202 Euros.
A company is defined as small or medium sized if the net turnover in the previous year was less than approximately 3 million Euros.
Accounting Dates
Accounts should be prepared on a monthly basis in order to maintain control of the financial position of the company.
Spanish legislation requires various returns be submitted for the three months ended 31st March, 30th June, 30th September and 31st December, predominantly to account for IVA and any retentions withheld from payments to suppliers.
If accounts are not produced monthly then they must be kept quarterly in order to produce these returns.
At the year end which is 31st December for all companies summary returns have to be submitted, together with a final tax declaration and the annual accounts to the Mercantil Register (Spanish Companies House).
Payment of Company Tax
The company tax return must be filed within 6 months and 25 days after end of accounting period ie 25th July of the following year.
Payment is made by instalments of company tax is in April, October and December. As a general rule, each instalment is 18% of the previous year's company tax liability. The balance is paid on the annual tax filing date above.
A separate method of calculation applies to companies whose turnover in the previous year exceeded 6,010,121 Euros
Tax losses can be carried forward for up to 10 years.
Capital Gains.
Capital gains made by companies are taxable as part of profits
Retentions.
There are a number of expenses that require a percentage of the net amount to be retained by the company and then paid to the Spanish authorities on the normal quarter dates.
Examples are Rent, Self Employed Professionals and taxes relating to staff payroll.
EMPLOYEE LEGISLATION AND COSTS
Social Security.
This can be compared to the National Insurance regime in the UK, this is paid monthly on the last day of each calendar month.
Wages.
Wages attract personal tax and also social security, normally when all of this has been taken into account the employer and employee cost approximately an additional 45% of the salary. This is quite high but it should be noted that wages in Spain are very low.
For example payment of €1000 per month to an administration assistant would yield a gross cost of €1450 to the company. Note the 45% includes both employer and employee contribution (which is normally borne by the employer due to the low wages).
Employee Contracts.
All employees must be employed under legal contracts.
NOTE.
The above is not a comprehensive authority of the Spanish Taxation Regime and is meant as an overview. Spain has a number of Autonimous Regions which may have differing tax rates. Andalucia falls under the general spanish tax regime outlined above.
Last Update 14 November 2006
