Spain tax system - taxation of Spanish S.A. companies and individuals: VAT, income tax and capital gains. Tax treaties of Spain.

Tax residents pay income tax on their worldwide income and non-residents pay tax on income from sources in Spain.

Income tax is paid at progressive tax rates.

The tax rates are the sum of the national rates and the rates approved at the level of the autonomous regions, and therefore vary according to the area of residence.

The following rates can only be used as a general guide and should be quoted according to your area of residence:

• income up to 12,450 EUR - 19%;
• income from 12,450 to 20,200 EUR - 24%;
• income from 20,200 to 35,200 EUR - 30%;
• income from 35,200 to 60,000 EUR - 37%;
• income from 60,000 to 300,000 EUR - 45%;
• income over 300,000 EUR - 47%.

With respect to investment income, tax is charged at the following rates:

• 19% on the first 6,000 EUR;
• 21% on income from 6,000 to 50,000 EUR;
• 23% on income from 50,000 to 200,000 EUR;
• 26% on income over 200,000 EUR.

Companies that are tax residents in Spain pay income tax on worldwide income and foreign tax on income from sources in Spain. The general rate of income tax in Spain is 25%. The profits of newly created companies are taxed at the rate of 15%.

Capital gains are taxed at the general rate of income tax.

There are some exemptions. Thus, 95% of the profits from the sale of companies with a minimum 5% stake or with a purchase price greater than 20,000,000 EUR and a holding period of at least one year may be exempt from tax.

Withholding tax is 19% for dividends and interest and 24% for royalties.

Tax can be withheld on certain other income payments.

Tax rates can be reduced on the basis of double taxation treaties and EU directives.

The standard rate of VAT is 21%.

For some goods and services, it is 10% and 4%.

Employers pay a social security contribution (under the general insurance system) of 29.9%.

In addition, a contribution is paid for insurance against accidents at work.

The rates vary according to the economic sector.

Employees pay a social insurance contribution (under the general insurance system) of 6.35%.

These rates apply to the remuneration of employees. The minimum base cannot be less than the fixed limit (1,050 to 1,466.4 EUR depending on the occupational category) and cannot exceed 4,070.1 EUR per month.

Stamp Duty is levied on notarised transactions and transactions recorded in public registers as well as certain other transactions.

The rate is between 0.75% and 1.5%, depending on the region and the type of transaction.

A 1% capital levy is payable by shareholders on the reduction of capital or liquidation of a company.

Local taxes are levied on real estate.

This tax is paid on the value of assets at the end of the year.

There are national non-taxable minimums in general and for certain types of assets; regional authorities can adjust them.

The tax rates are progressive and are set by the regional authorities; if the regional authorities do not set the rates, the rates set at the national level apply (0.2% - 3.5%).

In the case of inheritance and donation of assets and rights, a tax is payable.

The relevant regulations are set at the regional level.

Tax obligations depend on a number of factors, including the degree of kinship.

Tax rates are progressive and, depending on the value, range from 7.65% to 34%. These rates are subject to change at the regional level.

A foreign company is considered a controlled company if it owns, individually or jointly with related persons, more than 50% of the shares, capital, voting rights, rights to distributions.

The CFC Rules may apply if the foreign company pays an income tax of less than 75% of the relevant Spanish tax.

The CFC Rules do not apply to a company in an EU Member State that is established for economic purposes and has a real economic activity there.

The CFC rules apply if there is no economically justifiable purpose for using the CFC, it has insufficient assets and personnel, etc.

Taxable income may include investment/passive income - interest income, rental income, royalties, invoicing income, etc.

There are exceptions.

Spain has signed 96 Double Tax Treaties (DTC) and 11 Tax Information Exchange Agreement (TIEA) with the following jurisdictions:

96 DTCs: Albania, Algeria, Andorra, Argentina, Armenia, Australia, Austria, Azerbaijan, Barbados, Belarus, Belgium, Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Colombia, Costa Rica, Croatia, Cuba, Cyprus, Czech Republic, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea (Republic of), Kuwait, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Morocco, Netherlands, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Qatar, Saudi Arabia, Senegal, Serbia, Singapore, Slovakia, Slovenia, South Africa, Sweden, Switzerland, Tajikistan, Thailand, Timor-Leste, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Venezuela, Vietnam.

11 TIEAs: Andorra, Aruba, Bahamas, Bonaire (Saint Eustatius and Saba), Curaçao, Denmark, Jersey, San Marino, Saint Maarten.

Spain has also signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The Multilateral Convention entered into force for Spain on January 1, 2022.

In general, there are no restrictions on foreign exchange transactions. However, in some cases, particularly when exporting banknotes, there may be notification or authorization requirements.