Companies have a number of tax obligations to fulfil. Some tax returns are filed once a year, others on a quarterly basis and some on a case-by-case basis.
Tax obligations of companies
Corporate income tax can be broadly defined as the tax levied on the income of companies and other legal entities. The general rate of taxation is 25% on profits, although other tax rates vary depending on the specific characteristics of the company:
- 15% for newly created entities (during the first two years).
- 10% for non-profit entities.
- 4% for entities under the Canary Islands Economic and Fiscal Regime.
When is corporation tax paid?
This tax is paid by filing different forms at different times of the year:
Form 200: companies must file a corporate income tax return between 1 and 25 July each year. In this tax return, the profits or losses of the previous year are declared. It is obligatory, i.e. even if no activity has been carried out or no taxable income has been obtained, it must be filed.
Form 202: corresponds to the payment in instalments of corporation tax. It is filed in the months of April, October and December when the company has obtained positive results in the filing of form 200 for the previous period. The rate to be applied is 18% in general and 24% for companies with an annual turnover of more than 10 million euros.
Value Added Tax
Value Added Tax (VAT) is an indirect tax on consumption that is levied on the supply of goods and services. However, depending on the goods and services provided, the amount of this tax may vary. Thus, the amounts applied to each rate are as follows:
- General VAT 21%: this is the default rate applied to most products and services. This is 21% of the amount paid, and is applied to all products and services that cannot be included in the reduced or super-reduced VAT.
- Reduced VAT 10%: this is the rate applied to a series of products that are considered basic necessities. This applies to pharmaceuticals, food products, water, as well as agricultural goods. On the other hand, among the services, home renovation works, as well as sports services or social assistance, are services that are subject to reduced VAT. This is 10% of the amount paid, and is applied to all those products that are so typified by law.
- Super-reduced VAT 4%: Super-reduced VAT is applied to goods and services that are considered, in the eyes of the law, as goods of prime necessity. These are:
- Basic foodstuffs
- Medicines and medical treatment
- Prostheses, implants, vehicles adapted for people with reduced mobility, etc.
- Books and press.
This VAT is 4% of the amount paid, and the law specifies which products are eligible for this special rate.
- VAT-exempt activities: this refers to all those services or goods that, being within the scope of VAT, are not subject to any charge for their acquisition or contracting. Examples include:
- Medical operations
- Activities of a social nature
- Educational activities
- Real estate activities
- Financial activities
Tax on Economic Activities
The Tax on Economic Activities is a tax that is applied to self-employed persons as well as to companies, due to the fact that they carry out a business, professional or artistic activity in Spanish territory.
There is an extensive list of cases of exemption or non-application. These include individuals and corporate taxpayers with a net turnover of less than 1,000,000 euros. Even during the first two years after the start of an activity, all taxpayers will enjoy an exemption.