Tax and Auditing Requirements

The following section is written for your general edification. The tax situation for each type of entity will vary dramatically based on factors including: industry, business activities, eligible exemptions, etc. In all cases, you are advised to seek professional tax and auditing services for a comprehensive overview of your individual situation.

For further guidance on navigating the Spanish tax regime, visit the website of the Agencia Estatal de Administración Tributaria, Spain’s main tax authority.

General Tax Information

(The following is an excerpt from Deloitte’s 2017 guide to Spanish taxation.)

‘Taxes are levied in Spain at the national level (either by the central government or the regions) and at the municipal level (by the municipal authorities). The main national taxes are the corporate income tax (“CIT”), branch profits tax and value added tax (“VAT”). Other taxes include capital duty, stamp duty, transfer tax, real property tax and miscellaneous taxes levied by the local governments.

Spain offers a special tax regime for Spanish holding companies (“ETVEs”).

VAT does not apply in the Canary Islands; instead a specific sales tax (“IGIC”) is levied. The Canary Islands also levy their own fuel and tobacco special tax.

Some specific rules may apply in the Basque Country and Navarra Region.

Spain has implemented the EU directives, including the parent-subsidiary, interest and royalties and merger directives. Spain also had implemented the savings directive, which required the exchange of information between tax administrations when interest payments were made in one EU member state to an individual resident in another member state…

National taxes are administered by the Ministry of Economy, Industry and Competitiveness, and its regional equivalents…

In principle, all Spanish entities with separate legal status (i.e. corporations, limited liability companies and most partnerships) and foreign corporate entities are liable for Spanish CIT. Spanish resident companies are subject to CIT on worldwide profits and capital gains. A nonresident company is subject to CIT only on Spanish-source income and gains, subject to the provisions of an applicable tax treaty.

The basic 25% corporate tax rate applies to the worldwide profits of resident corporations.

Trading profits and other income arising through a Spanish PE of a nonresident entity also are subject to tax at the full corporate rate. An additional tax at a rate of 19% is imposed on income remitted to a foreign head office (with some exceptions, discussed under 4.4, below). Income of a nonresident entity not connected with a PE generally is taxed at lower rates via withholding at source.

Special tax rates apply to certain companies, such as collective investment institutions, including real estate investment funds (1%), certain cooperatives (20%) and entities involved in hydrocarbon research and exploitation and credit institutions (30%). Special regimes exist for Spanish REITS (“SOCIMIS”), Spanish economic interest groupings and EEIGs, “temporary business associations,” venture capital companies and funds and industrial and regional development companies…’

Meanwhile, cooperatives are taxed under a special tax regime established by the Cooperative Tax Regime Law of 20/1990. Ordinary profits are taxed at 25%, although some unique instances may call for a higher tax rate of 30%. Cooperatives also receive certain tax exemptions. Please refer to a tax professional for further guidance on your individual situation.

Cryptocurrency-Related Tax Information

Cryptocurrency is exempt from VAT tax in Spain.

Compliance

Compliance requirements may differ depending on situational tax liabilities and incorporation type. Generally speaking, all businesses must publish annual financial statements (prepared in accordance with Spanish accounting standards). These must be prepared by directors within three months of the end of the fiscal year.

Moreover, external audits are required for foundations that meet any two of the following conditions:

• Staff of over fifty persons
• Total assets exceed 2.4 million euros
• Total net amount of annual turnover exceeds 2.4 million euros

Not-for-Profit Deductions and Exemptions

Nonprofit organizations (“NPOs”) that satisfy certain conditions (e.g., foundations that spend at least 70% of net income in pursuit of its general purpose) are eligible to request exemption from certain taxes on income under the Law on Patronage No 49/2002. NPOs may also request exemptions from local taxes from the appropriate tax authority.

NPOs are exempt from corporate income tax for:

• Donations and contributions
• Fees from associates
• Grants
• Income from movable and immovable property (e.g., capital gains, rents, dividends)
• Capital gains
• Attributed income
• Income from qualifying business activities

This also extends to related qualified business activities if the total income from those activities doesn’t exceed 20% of total income, or minor activities for which profits do not exceed 20,000 euros.

For non-exempt income, the taxable base is subject to a reduced corporate income tax rate of 10%.

Exemptions and Deductions for Giving Donations

Individual donors may receive a tax credit of 25%, while corporate donors may see a tax credit of 35%. Increases of up to 5% may be given if the donation aligns with priority activities.

Sources

• Coindesk

  Spanish Bitcoin Community Celebrates Bitcoin’s VAT Exemption

• Law 49/2002, Of 23 December, Tax Regime Of Non-Profit Entities And Tax Incentives To Sponsorship (Translated in English)

• International Center for Not-for-Profit Law

  Spain: Law on New Non-Profit Organization Tax Regime Enters Into Fore

• Credit Cooperative Institutions in European Countries