Spain is a kingdom, a member of the European Union, a country rich in history, culture and geography. The country attracts foreign investors due to its excellent climate and the possibility of obtaining a residence permit and conducting business. Industry, agribusiness, fashion, tourism and biotechnology are developed in Spain. Taxes in Spain are high, but compared with other European states, the legislation is loyal to non-residents who want to do business in the country. Financial statements must be filed on time each year. If certain limits are met, it is possible to file abbreviated accounts: a condensed balance sheet and a condensed statement of changes in equity and no cash flow statement can be disclosed. Such abbreviated accounts are not subject to mandatory audit.
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As a member of the European Union (EU) Spain is subject to the accounting, audit and financial reporting requirements set in EU regulations and directives implemented into national laws and regulations.
The Commercial Code imposes the obligation on companies to keep books of accounts and provides the basic legal framework for accounting. According to the Commercial Code, all companies must make financial statements in accordance with the General Accounting Plan of Spain (GAAP of Spain) and file them with the Commercial Register.
Companies incorporated in Spain must prepare and file annual financial statements in accordance with the chronological order of all transactions. According to provisions of the Commercial Code, balance sheets and inventories must be made periodically. The following documents must be kept:
Financial statements include a balance sheet, profit and loss statement, statement of changes in equity, cash flow statement and notes to accounts.
All companies in Spain must file financial statements with regulatory authorities. The following legal forms of business entities must file financial statements:
Spanish companies can prepare a condensed balance sheet and statement of changes in equity if at least two of the following criteria are met on the date of the end of the period in the last two financial years:
It is worth noting that when preparing condensed statements (balance sheet and statement of changes in equity), there is no requirement to prepare a cash flow statement.
A profit and loss statement can also be prepared in condensed form if at least two of the following criteria are met on the date of the end of the period in the last two financial years:
Companies also have the right to prepare condensed statements (balance sheet, statement of changes in equity and profit and loss statement) for their first financial year if on the date of its end 2 of the above criteria are met.
Financial statements of Spanish companies must be audited, except for condensed reports on the company’s activity.
Law 22/2015 requires all public companies, including, but not limited to, listed companies, credit institutions, insurance companies and financial broker companies, to be audited and appoint an external auditor. Furthermore, companies that meet at least 2 of the following characteristics during 2 consecutive years must audit their financial statements:
Publication of accounts by the regulatory authority is annual and compulsory. Directors of a company have 3 months after the financial year-end closing to prepare accounts. Accounts must give a reliable representation of the company’s activity and be signed by all directors of the company. If any of the signatures is absent, accounts must contain a detailed explanation of the reason why.
Reports on the results of the company’s activity must be presented for approval at an annual general meeting of shareholders, and within 1 month after their approval they must be filed with the Commercial Register along with the resolution of the general meeting of shareholders. This information is available to the public, and the Commercial Register keeps the received documents for 6 years.
An annual profit tax return shall be filed within 6 months and 25 days after the end of the tax year.
Non-fulfilment of the obligation to file information with the Commercial Register by the set deadline results in a penalty of 1 200 to 60 000 EUR. The amount of the penalty is determined based on the company’s size in terms of total assets and turnover for the latest financial year for which the statements have been filed.
If the company’s annual turnover exceeds 6 000 000 EUR, the maximum amount of the penalty for each year of the delay is 300 000 EUR.
If accounts are filed before the penalty accrues, its amount will be 50% of the minimum threshold.
Standards on consolidated financial statements were approved by Royal Decree 1159/2010 of 17 September in the process of the adoption of Spanish legislation on accounting in accordance with EU legislation.