All
companies with tax headquarters in Spain are required to pay Corporation Tax , the collection of which
is primarily intended to support the welfare state. The tax rates that
apply to companies and the deductions to which they are entitled are regulated by
different laws published in the BOE , although large companies must
be vigilant because changes are looming on the horizon.
What is the Corporation Tax?
The Corporation Tax is levied on the profits obtained by
companies and legal entities whose tax domicile is in Spanish territory . This
tax, which is paid annually, is structured around the company's accounting and is calculated taking into account the
results obtained, according to the tax base . It is
of a personal nature since it assesses the circumstances of each company when
determining the amount they must pay.
What tax rates are currently applied?
- General rate of
25% ,
which has been in force since January 1, 2016 and applies to all
companies.
- Reduced rate of
15% for entrepreneurs , applicable only during the first
two years after incorporating the company, except for equity companies. It
is applied in the first tax period in which the tax base is positive.
- Reduced rate of 20% for
cooperatives , which is applied to tax-protected
cooperative societies, with the exception of credit cooperatives and rural
savings banks. However, non-cooperative results are taxed at the
general rate of 25%.
Apart from these tax rates, there are further reductions for
special entities:
- Reduced rate of 10% for
associations and foundations , provided that they are declared
of public utility and are registered in the corresponding registry.
- Reduced rate of 1% for investment
companies ,
applicable to all real estate investment companies, financial investment
funds and investment companies with variable capital.
What changes does the Corporate Tax reform
foresee?
The Ministry of Finance has announced its intention to increase
the Corporation Tax, so that a minimum tax rate of 15% is applied for
large companies and 18% for banks and oil companies.
In practice, they will limit the deductions that allow these
companies, instead of paying the general rate of 25% that corresponds to them,
to pay 12% or even 7%. The problem is that these companies can take
advantage of different tax benefits, such as the freedom to determine the rate
of depreciation of their fixed assets and real estate investments or deductions
for reinvested capital gains and investments in R + D + i.
As a result, in 2017 large companies taxed at an effective rate
on the accounting result in Corporation Tax of just over 6%, while the rest of
the companies did it around 15%. This means that SMEs have to bear a tax burden that
doubles the obligations imposed on large companies, as revealed in the Annual Tax
Collection Report .
For this reason, the Government has proposed to put an end to
inequality in tax treatment, protected by a complex architecture of deductions
that only benefit large companies, setting a minimum tax rate of 15%, which it
considers to be "social justice", below which no deduction can be
applied.
When will the 15% Corporation Tax come into
effect?
The draft of the General
State Budgets for 2019 will be presented very soon. Although the Government has
indicated that some of the new fiscal measures will not be included, they will
be passed to Congress as bills to take effect.
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