Tax rates in Spain

Company Tax

25%

Tax Rate For Foreign Companies

Resident companies, which are companies incorporated in Spain, registered in Spain or effectively managed in the country, are taxed on worldwide income and capital gains. Non-resident companies are taxed only on Spanish-source income and capital gains. For permanent establishments in Spain of foreign companies, non-resident income tax is chargeable on income that may be allocated to the permanent establishments at a 25% tax rate.
Income repatriated from a branch to its head office is subject to a 19% withholding tax rate at the source, unless the head office is an EU resident or can benefit from a tax treaty and certain conditions are fulfilled.

Capital Gains Taxation

Capital gains are usually included in taxable income and are taxed at the standard rate of corporate income tax (25%). 95% of capital gains are exempt from tax if a participation of at least 5% in the subsidiary is held for a one-year period before the disposal of shares, resulting in an effective tax rate of 1.25%. Until 1 January 2021, the 5% requirement was deemed to be met if the participation in the subsidiary exceeded EUR 20 million, but this rule no longer applies. Nevertheless, in fiscal years 2021 through 2025, taxpayers with shareholdings acquired before 2021 that had an acquisition value of over EUR 20 million but that do not meet the shareholding percentage of 5% may continue to apply the full exemption for dividends and capital gains (provided that the general requirements are met).

Main Allowable Deductions and Tax Credits

Business expenses are generally deductible if incurred for the purpose of earning a profit, are properly recorded and documented, and provided that a particular deductibility restriction or limitation does not apply. Payments of real property tax and local surcharges on these taxes are deductible in determining the corporate tax base. All salaries, wages and bonuses paid are generally deductible, as well as severance pay (this last one up to a limit of EUR 1 million/employee). Bad debts are deductible, provided certain conditions are met.
Donations are non-deductible for CIT purposes, but a 40% tax credit is available for donations to qualified non-profits. If donations to the same entity meet or exceed previous years' amounts for two consecutive years, the credit increases to 50%. This credit is not capped at 25% of the donating company's gross tax payable (minus certain deductions). The tax credit base cannot exceed 15% of taxable income, with excesses carried forward for ten years. For listed priority sponsorship activities, the credit may increase by 5%, and the base limit can rise to 20%.

Taxes beyond CIT, like business and professional activities taxes (excluding withholdings), are deductible expenses if they're recorded as such due to their nature. Sometimes, indirect taxes such as non-deductible VAT or transfer tax can be included in asset values for depreciation purposes. Penalties for tax non-payment and late filing/payment surcharges or other tax violations are not tax-deductible.

Tax losses can be carried forward indefinitely, but generally not carried back. There are no specific tax loss categories like operating or capital. Companies with a turnover under EUR 10 million can reduce their taxable income by up to 10% by creating a reserve for levelling off tax losses, capped at EUR 1 million, and reversible within five years. Tax losses can offset future positive income, with the offset limit depending on the company's prior 12-month net turnover. If under EUR 20 million, losses can offset up to 70% of the tax base. For turnover between EUR 20 million and EUR 60 million, the limit is 50%, and for turnover over EUR 60 million, it's 25%. However, up to EUR 1 million in tax losses can always be offset without limit. These limits do not apply if the company is dissolved, except in tax-neutral restructurings, or if the income comes from debt relief or deferral agreements with creditors. Complex rules may restrict the use of tax-loss carryforwards after company restructuring or a change in shareholders.

Tax incentives are provided for R&D (25%, or 42% if the expenses are higher than the average R&D expenses incurred by the company during the previous two years) and technological innovation of existing products (12% of the costs). An additional tax credit of 17% can be availed of for staff expenses incurred for staff exclusively carrying out and qualified to carry out R&D activities. Special tax treatment is also given to venture capital companies and funds.

Other Corporate Taxes

Shareholders are subject to a 1% capital duty tax on capital reductions and company dissolution. Payroll tax, real property tax (with rates depending on the region and the property value) and stamp duty (0.5% for all notarized document, ranges from 0.75% to 1.5% for other transactions depending on the region and the type of transaction) also apply. A hydrocarbons tax relating to the exploration, research and exploitation of hydrocarbons is also in force.

A transfer tax, ranging from 6% to 11%, depending upon the region, is generally levied on inter vivos transfers, including real estate transfers and real estate leases that are exempt from VAT. Transfers of shares generally are exempt from transfer tax. Companies resident in a tax haven for tax purposes that own real estate or hold real property rights in Spain are subject to a tax equal to 3% of the assessed value of the real estate.

The employer contributes 30.48% of the employee’s wages for social security (24.18% for common contingencies, 5.5% for unemployment, 0.2% for the salary guarantee fund, and 0.6% for professional training), plus a contribution for professional contingencies ranging between 1.5% and 7.15%, depending on the type of activity. The maximum monthly contribution base is EUR 4,720.50 in 2024.

A 3% tax applies to specific digital services (such as online advertising, online intermediary services, and data transmission) provided to users in Spain. Taxpayers include entities, whether Spanish tax residents or not, whose total income in the previous tax year exceeds EUR 750 million, or whose income from digital services in Spain exceeds EUR 3 million. For entities in a corporate group, thresholds are determined collectively.

For 2023-2025, a temporary energy levy is imposed on key players in the energy sectors and on individuals or entities engaged in crude oil or natural gas production, coal mining, or oil refining in Spain, with some exceptions. Set at 1.2% of net turnover from activities in Spain for the preceding year, it has to be paid in advance and was non-deductible for CIT purposes. The levy could not be passed on economically, directly or indirectly. For CIT tax groups, the net turnover comprised the total turnover of the group's member entities.

In 2023-2025, the temporary levy on credit institutions and financial credit institutions applied to those operating in Spain whose combined interest income and commissions for 2019, as per their accounting rules, totaled EUR 800 million or more. For CIT tax groups, the income included the sum of all group entities' incomes. The levy, set at 4.8% of the net interest income and commission income and expenses from Spanish activities, was paid in advance and not deductible for CIT. It couldn't be economically passed on.

Other taxes include: real estate tax (levied annually by the local authorities), a local tax levied on the increase in the value of urban land (applied at the time of the sale of the urban real estate), a motor vehicle tax, and waste collection fees.

Other Domestic Resources

Spanish Tax Agency

Tax Rate

Allowable Deductions and Tax Credits

Deductions are available for mandatory social security contributions, union fees (up to EUR 500), mandatory contributions to mutual benefit societies, and "other expenses" (capped at EUR 2,000, which may be higher for those working in a different town or for disabled workers). Alimony paid to an ex-spouse in accordance with a court decision is deductible. Contributions to qualifying pension plans can be deducted up to a maximum of EUR 1,500 per year, capped at 30% of total individual net income from employment and business activities (the limit can be increased by EUR 8,500 when it comes from business contributions). Furthermore, individuals whose spouses obtain income from employment or business activities up to EUR 8,000 can deduct the contributions made to qualifying pension plans from their own taxable income on behalf of the spouse (capped at EUR 1,000/year).

Several allowances are provided by the law for individuals (EUR 5,550, raised to EUR 6,700 for those over 65s and to EUR 8,100 for those over 75s) and families (varying according to the composition of the family). The descendant allowance varies: EUR 2,400 yearly for the first child, EUR 2,700 for the second, EUR 4,000 for the third, and EUR 4,500 annually for the fourth and beyond. Additionally, there's a EUR 2,800 yearly allowance for each descendant under three years old. A minimum family allowance for the disability of relatives in an ascending and descending line of EUR 3,000 for each relative or EUR 9,000 when the level of disability is 65% or more also applies. Click here to check the specific allowances that apply in different regions.

The expenses incurred to realise a business income can generally be deducted. Several reductions apply to the net business income.
Capital losses arising from transfers of assets are included in savings income and can only be offset against capital gains included in the savings income of the tax period.
For further information, visit the dedicated pages on the website of the Spanish Tax Authority.

Special Expatriate Tax Regime

Non-resident individuals are taxed at a flat rate of 24% on the gross amount of their income (i.e. no deductions or allowances are granted). For residents in other EU member states or European Economic Area (EEA) countries with which there is an effective exchange of tax information, the rate is 19%. Pensions are taxed at progressive rates between 8% and 40%. Capital gains, interest and dividends are taxed at 19%, royalties at 24%.
A foreign individual who is assigned to work and live in Spain may opt to be taxed as a non-resident for a six-year period.

The income tax is not levied on employment income obtained by tax-resident individuals if the work is effectively carried out outside Spain and if the work is carried out for a company, entity or permanent establishment which is not resident in Spain for tax purposes and a similar tax is levied in the country where the employee carries out the work (up to the limit of EUR 60,100).