Taxation Spain

TAXATION
  1. Individuals who are liable to pay taxes in Spain or having any dealing with the Spanish Tax Authorities are assigned a Tax Identification Number.
  2. The NIE is the Spanish tax identification number assigned to non-resident property owners in Spain, which is required for most formal registration and administrative procedures carried out in Spain.
  3. It enables to pay the annual taxes or register the property, as this number identifies foreigners in Spain for tax purposes.
  4. This number shall be given if a foreigner buys a car in Spain, a property, hire a telephone, or open a bank account.
For obtaining the NIE one shall apply to the Spanish police, he will be required to present the following documents:
  1. original passport plus 1 copy
  2. The NIE application form completed and signed
  3. 2 photographs
  4. Bank receipt of the NIE fee payment
The CIF identification number
  1. The corporate tax identification number (CIF) is the equivalent to the VAT number.
  2. It is always needed for running business into Spain, this becomes your company's identification for tax purposes and is required for any transactions.
  3. The CIF may be issued upon application to the Spanish Provincial Tax Office (Delegación de Hacienda).
PERSONAL INCOME TAX
  1. The Personal Income Tax (Impuesto sobre la renta de las personas físicas/IRPF) is a direct tax levied on the income of individuals.
  2. The individual's income may derive either of a dependent work or obtained by means of self-employment: development of a business or professional activities.
  3. The taxable income is determined as the difference between the income earned and the expenses that are deductible according with the Spanish Law.
  4. At the moment, only those individuals earning more than € 21,035.42 a year in Spain, are obliged to make the income tax. declaration, above this amount carries a progressive tax structure.
  5. The tax period coincides with the calendar year.
  6. This tax is assessed differently for residents and non-residents in Spain.
NON-RESIDENTS INCOME TAX LIABILITY
  1. Non-residents are liable for this tax on any income arising in Spain, such as a money deposit with a Spanish bank, a property in Spain, or income derived of any business in Spain.
  2. Property owners are taxed on their property income, the tax base is the property catastral value (valor catastral), which can be found on any I.B.I. receipt. Tax base rate is 25% of a 2% of the catastral value.
SPANISH RESIDENT
  1. If you are Spanish resident you are taxed for your worldwide income. You may deduct your income tax paid in your home country.
  2. Double tax treaties are in place to avoid double-taxation. When there is no treaty with your country of origin, you may deduct the foreign tax paid, foreign compensation may also be applied.
  3. Those non-residents living more than 183 days in Spain are also considered as residents for tax purposes, even if they have not obtained their residence permit.
TAX BASE
  1. The income tax base may be determined in two different ways: direct evaluation or objective evaluation.
DIRECT EVALUATION
  1. This method will be applicable to business and professional activities performed by the taxpayer that are not subject to the objective evaluation, either because that method is not applicable or, when applicable, because the taxpayer filed a waiver.
  2. Net income will be computed as the difference between the assessable income and the deductible expenses.
SIMPLIFIED DIRECT EVALUATION
  1. This method is applied to some business and professional activities, which are subject to ordinary direct evaluation and which turnover during the previous year did not exceed € 601,020.21.
  2. The taxpayer may file a waiver in the month of December before he or she wishes its effects arisen, these effects will last for 3 years.
  3. Net income will be computed as the difference between the assessable income and the deductible expenses.
  4. These are only general guidelines, the calculation of the simplified direct evaluation presents other particularities that your Spanish Lawyer may inform you about.
OBJECTIVE EVALUATION
  1. This method is applicable to the income resulting from those business and professional activities which the the Spanish Tax Ministry appoints.
  2. The taxpayer may file a waiver in the month of December before commencing a new tax period. The waiver effects will last for 3 years.
  3. Net income is computed by applying standard methods that the Spanish Tax Ministry determines.
  4. According with the results of the tax declarations, if the contributors must pay, tax declarations shall be filed from the 1st of May to the 20th of June. If contributors are entitled to tax refund, then this period will be extended up to the 30th of June.
  5. Income tax declarations shall be filed to the Tax Office of the contributor's address.
  6. Contributors also have the possibility to file their tax declaration to the Spanish bank where they have an account; provided that they are entitled to tax refund or shall make any payment as a result of their tax declaration.
DEDUCTIBLE EXPENSES
  1. Certain deductible expenses, such as medicines, deductions for dependants, amounts paid for the purchase of a home or accounts opened for that purpose (Cuentas vivienda) may be claimed in the annual tax returns.
GENERAL INFORMATION
  1. Corporate tax (Impuesto de Sociedades) is a direct tax on corporate profits obtained within the taxation period, which normally coincides with the calendar year, unless a different period is stated in the company's articles of association.
  2. In any of the cases the tax period cannot exceed 12 months.
  3. Taxable income is computed with reference to the contributor's profit and loss account. Contributors are commercial as well as civil corporations, temporary business associations, Investment Funds.
Spanish resident companies
  1. A company is considered Spanish resident in either of he following cases:
  2. If the company was incorporated under Spanish law
  3. If the company's registered office is in Spain
  4. If the company's management and head-office are located in Spain.
  1. Although tax rate applicable to the net income of corporations is generally 35%, some specific types of companies such as foundations, cooperatives, associations, and Investment Funds may apply a reduced tax rate of 30%.
  2. This special tax regime is applicable to small and medium sized companies which net turnover does not exceed € 1,502,530.3.
  3. These companies may also get tax incentives such as deduction of leasing installments paid.
NON-RESIDENT CORPORATIONS
 
Non-resident companies are those without permanent presence in Spain. These are subject to a 25% withholding tax on income obtained in Spain. (35% for capital gains tax).