Corporate tax in Spain (Impuesto sobre Sociedades, IS) is a tax on company profits. It is levied on the income earned by companies and other entities during the tax period, a financial year that coincides with the calendar year.
What is corporate tax in Spain?
As we noted above, this tax is paid on the profit earned for the reporting year. Even so, returns must be filed even when there is no profit but a loss or zero profit, or when the company is going through insolvency proceedings or is being wound up.
The basis for calculating corporate tax in Spain is the company’s accounting profit for the financial year. The law allows negative tax bases from previous periods to be offset, within certain limits. The accounts and results of the business are the starting point for determining the tax base and the amount of tax payable each year.
Corporate tax in Spain is a personal, direct and proportional tax levied on the income of commercial companies and other entities registered in the country. It also applies to civil partnerships set up for a commercial purpose, associations and foundations, but not to sole traders, who pay personal income tax (IRPF).
Who pays corporate tax in Spain?
The following must pay corporate tax in Spain:
- Legal entities:
- Commercial companies: limited liability companies (SL), public limited companies (SA), general partnerships, employee-owned companies.
- Civil partnerships with a commercial purpose, cooperatives.
- Associations and foundations.
- Entities without legal personality:
- Temporary business associations (UTE), agricultural communities.
- Funds: pension funds, investment funds, venture capital funds, mortgage market regulation funds, securitisation funds, guarantee funds and bank asset funds.
Corporate tax in Spain is not paid by sole traders, non-commercial civil partnerships, certain associations (for example, housing cooperatives) and others. Public bodies, including authorities at all levels, and the Bank of Spain are fully exempt. Partial exemption applies to non-profit organisations, charitable foundations, non-governmental organisations, professional associations, official chambers, trade unions, political parties and other similar bodies.
How are the tax base and corporate tax calculated in Spain?
The tax base is determined as follows:
- Net profit for the tax period is calculated as the difference between income received and expenses incurred.
- Additional adjustments are made to reflect the differences between accounting rules and tax law.
- Losses from previous years are taken into account.
An example of an adjustment: a company has booked an administrative fine of €3,000 in its accounts. Under current law (Law 27/2014 of 27 November), such expenses are not deductible for tax purposes, so an adjustment is needed.
Calculating the tax:
- After all adjustments and deductions, the net tax base is obtained.
- The applicable tax rate is applied to the base to obtain the total amount of tax.
- Any available tax incentives and deductions are applied.
- Withholdings and payments on account made during the tax period are taken into account to determine the final amount of tax payable.
Calculating the tax base and the final amount of tax therefore involves accounting profit, adjustments, tax rates, deductions and incentives.
Tax period and tax returns
The tax period for corporate tax corresponds to the company’s financial year and cannot exceed 12 months. The end date of the tax period is set by the company’s articles of association. If the articles do not specify a date, the tax period ends on 31 December each year.
The tax period also ends if the company is wound up, moves its residence abroad or changes its legal form in a way that results in exemption from corporate tax.
Forms 200, 202, 220 and 222 are used for different types of companies and different returns. The final annual corporate tax return must be filed within 25 calendar days following the six months after the end of the tax period.
Corporate tax rates in Spain
In 2024, corporate tax in Spain is calculated at the following rates:
- Credit cooperatives and rural savings banks (non-cooperative income): 30%
- Credit institutions: 30%
- General rate: 25%
- Non-profit organisations that do not meet the requirements of Law 49/2002: 25%
- Credit cooperatives and rural savings banks (cooperative income): 25%
- Small and medium-sized businesses, micro-enterprises and entities of limited size: 23%. This reduced rate has applied since 1 January 2023 to companies and entities with annual turnover below €1 million. The return filed in July 2024 will therefore be the first to reflect this reduction.
- New companies carrying on an economic activity: 15% in the first tax period in which the tax base is positive and in the period that follows it.
- Start-ups that meet the requirements of the Start-up Law (Law 28/2022): new companies or companies no more than 5 years old, registered in Spain, with most of their staff employed under contracts in Spain, engaged in innovative activity, not listed on a regulated securities market, that have not paid dividends and have annual turnover below €10 million. The rate is 15% in the first tax period in which the tax base is positive and in the period that follows it.
- Specially protected cooperatives: 20%. Income not related to cooperative activity is taxed at the general rate.
- Non-profit organisations that apply the tax regime set out in Law 49/2002: 10%.
- Investment companies and funds, and bank asset funds: 1%.
- Pension funds regulated by Royal Legislative Decree 1/2002: 0%
