Spanish company tax
Company tax, also known as corporate tax, is known in Spanish as Impuesto sobre Sociedades, or IS. The Spanish Companies Act provides for a variety of company types, the common ones being limited liability companies (SL) or companies limited by shares (SA). Regardless of the type of company, all are required to file a Compnay tax return by law.
Related article: How to set up a company in Spain?
In addition to corporation tax, a company may also be subject to other taxes, such as VAT.
Company tax rate
The Company tax rate is a fixed 25%, regardless of the amount of profit.
Note: In order to promote entrepreneurship, the tax office only levies a 15% tax rate on new companies in the first year of profitability and in the following year.
Example 1: The company makes a loss in the first and second years and only starts making a profit in the third year. The first two years are free of tax, the third and fourth years are taxed at 15% and the fifth year is taxed at 25%.
Example 2: The company starts making a profit in the first year, makes a loss in the second year, and makes a profit in the third year. In the first year it pays 15%, in the second year it does not pay, and in the third year it starts paying 25%.
In simple terms, the taxa base for Compnay tax is the company’s net income, i.e. gross income minus deductible expenses. Expenses that are generally related to the company’s line of business are deductible.
Example: A company has gross income of €100,000 a year, expenses of €70,000 and net income of €30,000. This would result in a tax charge of €7,500.
When do I have to declare it?
Company tax returns are due three times a year: in the first 20 days of April, October and December.
In July of the following year, the annual tax return is filed for the whole of the previous year’s income. For example, the annual tax return for 2022 must be filed in 2023.
Tax Return: MODELO 200 and MODELO 202
Tax forms all called “Modelo” in Spanish. Compnay tax returns must be filed on the official forms specified by the Tax Agency. The tax return requires the use of the MODELO 202 , while the annual tax return requires the use of the MODELO 202. Both forms can be completed and submitted on the official website of the Tax Office at: https://sede.agenciatributaria.gob.es/
In addition to the Company tax, companies are required to produce annual accounts each year. The purpose of the annual accounts is for other people to know the company’s financial situation, not for taxation purposes. Therefore the annual accounts are not directly related to taxation.
