Corporate Tax in Spain

In Spain, the general corporate tax rate is 25%. However, different tax rates may apply depending on the type of company and the nature of its business.

Companies resident in Spain are subject to IS on their global income.

On the other hand, permanent establishments of foreign companies in Spain are subject to Non-Resident Income Tax (IRNR). This tax taxes income attributable to the permanent establishment at a tax rate of 25%.

The IRNR also applies to foreign companies and individuals not established in Spain that earn income in the country, as detailed in the Withholding on Account section.

New Creation Companies

Newly created companies in Spain benefit from a reduced tax rate of 15% during the first tax period in which they make profits, as well as in the following period. This reduced rate is not applicable to equity companies, which are those that do not carry out business activities, nor to newly created companies that are part of a national or international group.

Additionally, the reduced rate may not be applicable if the new company's business activity was previously carried out by a company or related person.

Companies and Start-ups

Companies that meet the legal requirements to be qualified as start-ups can benefit from a reduced tax rate of 15% during the first tax period in which they obtain positive tax bases and in the following three tax periods, provided that they maintain the necessary conditions to be considered start-ups.

To be considered a start-up, a company must meet the following requirements:

1. New Creation: The company must be newly incorporated or have submitted the public act of incorporation in the corresponding Mercantile or Cooperative Registry no more than five years in advance (seven years for companies in the biotechnology, energy, industrial and other strategic sectors, or for companies that have developed their own technology entirely in Spain).
2. Not Resulting from Restructuring: The company must not have emerged from a merger, spin-off or transformation of other companies that are not considered to be emerging.
3. Dividend Distribution: The company must not have distributed, or be in a position to distribute, dividends or returns.
4. Quotation: The company must not be trading on a regulated stock market.
5. Domicile: The registered, fiscal or administrative address must be in Spain.
6. Employment: At least 60% of the workforce must have an employment contract in Spain. In the case of cooperatives, for this calculation, employee partners and partners with a corporate relationship are counted as part of the workforce.
7. Innovation and Scalability: The company must be developing an innovative business project with a scalable business model.
8. Business Group: If the company is part of a group, the group or each member company must meet the requirements mentioned above.

Start-up companies will lose the right to apply the reduced tax rate in the following cases:

• Expiration of Status: If the company ceases to meet the requirements to be considered a start-up or the period of five or seven years has passed since its establishment.
• Extinction: If the company goes out of business.
• Acquisition: If the company is acquired by another company that does not meet the requirements.
• Billing Threshold: If the net amount of the company's turnover exceeds 10 million euros.
• Environmental Damage: If the company carries out an activity that causes significant environmental damage, in accordance with Regulation (EU) 2020/852 of the European Parliament and the Council, concerning the establishment of a framework to facilitate sustainable investments.
• Convictions: If the holders of a direct or indirect shareholding of at least 5% of the share capital or the directors of the company have been convicted by a final judgment for crimes provided for in the Start-ups Act.

IS Minimum Taxation Rule

The minimum taxation rule applies to Corporate Tax taxpayers who meet at least one of the following criteria:

1. Net Turnover Amount: Taxpayers whose net turnover in the 12 months prior to the start of the tax period is at least 20 million euros.
2. Special Fiscal Consolidation Regime: Taxpayers who are taxed under the special tax consolidation regime, regardless of their net amount of turnover.

According to these regulations, the liquid contribution of the IS, understood as the fee after applying bonuses and deductions, cannot be lower than the result of applying 15% to the adjusted tax base. This tax base must be reduced or increased by additions or decreases related to the reserve for leveling negative tax bases (computable for small entities) and reduced by the special reserve for investments under the special economic and fiscal regime of the Canary Islands.

This measure is applicable to tax periods beginning on or after January 1, 2022.

The minimum tax rule will not apply to:

• Taxpayers who are taxed at the 10%, 1% or 0% tax rates of the IS.
• Listed companies that make investments in the real estate market.

There are special minimum tax rates for certain entities:

1. Newly Created Entities: Those that are taxed at the special rate of 15% will have a minimum liquid contribution of 10% of the tax base.
2. Credit and Hydrocarbons Institutions: Entities dedicated to the exploration, research and prospecting of hydrocarbons, as well as credit institutions, will have a minimum liquid share of 18%.
3. Cooperatives: The minimum liquid quota for cooperatives cannot be less than 60% of the full quota.
4. Entities of the Canarian Special Zone: For these entities, the positive tax base used to calculate the minimum liquid contribution will not include the part of the tax base corresponding to transactions carried out in the Canary Islands Special Zone that are taxed at the special reduced rate.

Rules for Calculating the Minimum Full Fee:

1. Initial Minorization: The full fee will be reduced by the amount of the applicable tax rebates (including rebates under the special economic and tax regime of the Canary Islands) and by the deduction for investments made by port authorities.
2. Application of Deductions: Subsequently, deductions will be applied to avoid double taxation, subject to the limits established for each incentive. If, after applying these incentives, the resulting fee is lower than the calculated minimum liquid fee, this fee will be considered as the liquid fee.
3. Minimum Liquid Fee Adjustment: If the resulting contribution is higher than the minimum liquid contribution, the necessary deductions will be applied (within the established limits) until the minimum liquid contribution is reached.
4. Special Deductions: Deductions from the special tax regime of the Canary Islands may be applied within their specific limits, even if the resulting amount is lower than the minimum required liquid contribution.
5. Application of Unused Incentives: Incentives not applied due to the minimum liquid quota rule may be applied in future fiscal years according to the corresponding regulations.

The minimum tax rule will also apply to taxpayers of Non-Resident Income Tax (IRNR) who operate through a permanent establishment in Spain.

Tax on Economic Activities

The Tax on Economic Activities is a direct local tax that taxes annually the carrying out of business, professional or artistic activities in Spain, regardless of whether they are carried out in specific places. The tax rate varies depending on several factors, such as the type of activity carried out, as well as the location and size of the premises where the activity is carried out. The tax cannot exceed 15% of the presumed average profits generated by business or professional activity.

Corporate Tax taxpayers and non-resident companies operating in Spain through a permanent establishment are exempt from this tax, provided that the net amount of turnover for the fiscal year of the last IS/Non-Resident Income Tax (NRIT) return filed before the local tax accrual date (January 1) was less than 1 million euros.