Corporate income tax is a tax that is paid by companies. In this section of our tax guide, we give you an introduction to corporation tax so that you can find out what it is and how it works.
What is the corporate income tax?
In what consist corporate income tax?
Corporate Income Tax (CIT) is a tax levied on the corporate income of certain entities resident in Spain. As a general rule, companies must file a corporate income tax return regardless of whether or not they have carried out activities during the tax period or have not obtained income subject to the tax.
Entities are resident in Spanish territory if any of the following requirements are met:
- That they have been incorporated under Spanish law.
- They have their registered office in Spanish territory.
- They have their effective place of management in Spanish territory (when the management and control of all their activities are located there).
You should bear in mind that in the Autonomous Community of Navarre and in the Historical Territories of the Autonomous Community of the Basque Country, CIT is applied according to the Economic Agreement and Economic Agreement regime, respectively. In our blog we have a section in which we explain how IS works in these regions.
Characteristics of Corporate Income Tax
Corporate income tax is direct, personal and periodic, just like personal income tax (IRPF). However, unlike personal income tax, the corporate tax rate is proportional. It does not increase as profits increase. All companies pay the same tax rate. However, in monetary terms, the higher the profits, the higher the amount to be paid.
On the other hand, there are a number of incentives whereby entities are able to reduce the amount of tax they pay. These incentives are granted to companies if they meet a series of conditions related to the number of employees they have, investment in innovation, employee training, the level of annual turnover or the length of time they have been in business, among other conditions.
The reduced rate is not applicable to entities that are considered to be an asset-holding entity.
The Corporate Income Tax Act establishes a general rate of taxation and a series of special rates, which are lower than the general rate, with some exceptions.
The general corporate income tax rate is 25%. However, a reduced rate is regulated for newly created entities. Thus, newly created entities that carry out economic activities in the first tax period in which the taxable income is positive and in the following one, at a rate of 15%, unless they are taxed at a lower rate.
However, the law restricts the application of this reduced rate to entities that are considered to be property-owning.
Special tax rates
30% rate – Taxable at 30% for credit institutions, as well as for entities engaged in exploration, research and exploitation of hydrocarbon deposits and underground storage facilities.
20% rate – Applicable to tax-sheltered cooperative societies, except in respect of extra-cooperative results, which are taxed at the general rate.
10% rate – Entities to which the tax regime established in Law 49/2002 of 23 December 2002 on the tax regime for non-profit organisations and tax incentives for patronage is applicable will be taxed at a rate of 10%. In particular, it will apply to foundations registered in the corresponding register and to associations declared to be of public utility.
Rate of 1% – Applicable to:
Investment companies with variable capital regulated by Law 35/2003, of 4 November, on collective investment institutions, provided that the required number of shareholders is at least 100.
Investment funds of a financial nature, provided that the required number of shareholders is at least 100.
Real estate investment companies and real estate investment funds, provided that the number of shareholders or unit holders is at least 100 and that their exclusive object is investment in any type of urban real estate for rental purposes.
Real estate investment companies and real estate investment funds which, in addition to meeting the requirements set out in the previous indent, carry out the activity of exclusively developing housing for rental purposes, when they meet certain conditions set out in the LIS.
The fund for the public regulation of the mortgage market.
0% rate – This will apply to pension funds regulated by the revised text of the Law regulating pension plans and funds.
Tax Form 200
Form 200 is an annual corporate income tax return. The company must file Form 200 between 1 and 25 July of the following year.
Tax Form 202
It is used to file the instalment payments of Corporate Income Tax in cases in which the last declaration of Form 200 has given a positive result. The payment of tax Form 202 will serve as an advance payment for the payment of the next return of said form. It will be filed in October, December and April.
Tax Form 220
It is similar to form 200 but more extensive as it has special attachments, for example for cooperatives. The filing deadline is the same as for Form 200. Here are the instructions for Form 220.