Tax law in Spain
Whether you work for a company in Spain, are self-employed, or own a property in the country, expert advice in tax law is always beneficial.
As tax lawyers in Costa Brava and Barcelona, we support international companies, entrepreneurs, employees, self-employed, and retirees, as well as owners and heirs of real estate in Spanish tax matters.
Our international clients appreciate that we can represent them professionally on-site in Spanish & Catalan and that they can communicate with us in English, German, or French.
Taxes for companies: corporate tax, sales tax, and trade tax
Foreign companies that want to operate in Spain, service providers regularly working in the country, and companies doing business with Spain, often face challenges related to tax legislation since they must comply with the applicable taxes depending on the product or service they offer.
Value added tax
Value Added Tax (VAT) is comparable to that of many European countries. In Spain, companies must file periodic sales tax returns – quarterly or monthly – depending on sales. At the end of the fiscal year, companies must prepare the VAT return for the previous year.
In Spain, three different sales tax rates apply depending on the category of the product or service. In addition to the standard tax rate (21%, general VAT), there are two reduced sales tax rates. The tax rate for food is 10% (reduced VAT). Basic food (e.g., bread, milk), books, newspapers, and medicines are subject to the super-reduced VAT rate of 4%. Some services (e.g., medical services or school classes) are exempt from sales tax.
If foreign companies that deliver goods to Spanish consumers and companies not entitled to a tax deduction (e.g., via their online shops or Amazon) exceed a € 35,000 delivery threshold are subject to Spanish sales tax. That applies to the items sent to Spain after exceeding the delivery threshold.
International companies from different countries can collect and pay Spanish sales tax. To do so, the company must first register with the Spanish Tax Agency to receive a tax identification number. In certain circumstances, a tax representative in Spain is required.
Companies must create an email to receive notifications from the Spanish Tax Agency. The company should also prepare and periodically file sales tax returns in Spain.
We address all your concerns regarding international and Spanish tax legislation. As a special service, we offer companies to participate in the SII (Suministro Inmediato de Información), an immediate transmission of information as part of the anticipated VAT return to the tax authorities. The SII allows VAT-relevant transactions (invoices) to be available to the tax authorities in real-time, so that the advance VAT return is always up-to-date.
The corporate tax is relevant for companies wishing to establish a business in Spain. Corporate tax is levied on legal entities such as limited liability companies (Sociedad Limitada or S.L.), public limited liability companies (Sociedad Anónima or S.A.), and trading companies. Corporate tax also applies to permanent establishments under Spanish income tax legislation.
The corporate tax rate in Spain is 25%. There are discounts, for example, for newly created S.L. that do not belong to a group. This can be especially interesting when setting up a branch or founding a start-up company in Spain.
In Spain, companies must justify their prices through a report that must be more or less detailed depending on the company size. These reports can be very complex, and we are pleased to advise international companies in this regard.
As tax lawyers in Barcelona and Costa Brava, we support international companies in Spain in matters related to corporate tax. In particular, this applies to bookkeeping according to Spanish commercial law.
Business activity tax
The trade tax (Impuesto sobre Actividades Económicas, ‘IAE’ for short) is levied in Spain by the municipalities in which the business activity is carried out. The tax is only levied if a turnover equal to or greater than 1,000,000 euros has been generated in a period of two years.
Real estate owners in Spain
Owners of real estate in Spain inevitably have tax obligations in Spain. Property transfer tax, sales tax, or stamp duty are the most common when acquiring a property in Spain.
Foreign owners with limited tax liability also have tax obligations, for example, owners who stay in Spain less than 183 days per calendar year.
Property tax (Impuesto de Bienes Inmuebles, ‘IBI’) is always payable in Spain and is calculated based on the cadastral value of the property. If the owner rents the property, the rental income is subject to Spanish income tax. If a holiday property is only used by the owner, the so-called non-resident income tax (Impuesto sobre la Renta de no Residentes) is due.
Non-resident property owners in Spain are required to prepare an income tax return and pay the corresponding balance to the local tax authorities.
The rental of real estate in Spain may also be subject to sales tax if commercial premises are involved or services similar to those of a hotel are provided in the case of private tourist rental of real estate (e.g., bed & breakfast).
Selling a property in Spain is also subject to tax for the seller. The sales profit (capital gain) is subject to income tax.
Whether you want to buy, rent or sell a property in Spain, we support you as a real estate owner in all tax matters. At Dr. Hohne, we make it easy for you to comply with your tax obligations in Spain.
Our real estate lawyers can also help you with a real estate purchase or rental, obtaining official permits for the property rental, or applying for a foreigner identification number (NIE).
Inheriting a property
If you inherit a property in Costa Brava or Barcelona, our tax lawyers advise you on inheritance taxes.