We offer the following services:
- Preparation and submission of VAT returns
- Preparation of either monthly, quarterly or yearly management accounts
- Preparation of accounts
- Completion and filing of online company tax returns
- Completion and filing of online individual tax returns
- Registration of new businesses for tax and VAT
- Tax advice for small/medium sized businesses and individuals
- Resident and non-resident tax advice
BUSINESS SET UP
In Spain you can set up the following types of business:
- Public Limited Company (S.A.)
- Limited Liability Company (S.L.)
- General or Limited Partnership (Sociedad Civil)
- Sole Trader – individual with unlimited liability
- Branch or Subsidiary (different concepts)
- Representative Office
All businesses have a legal requirement to keep full and complete books and records.
Public Limited Company or Corporation (Sociedad Anónima or S.A.) in Spain
The Public Limited Company, or Sociedad Anónima, in Spain is highly structured and regulated, decisions are decided by the majority and annual audits are required. This type of Spanish company is an autonomous legal entity and shareholders are not responsible for debts incurred by the company. All sociedades, not just the Sociedad Anónima, must pay some form of Company Tax (Impuesto sobre Sociedades), currently at 20 to 35% for Sociedades Anónimas. To start a Sociedad Anónima in Spain, you will need to draft and notarize the articles of incorporation and have a minimum available investment of € 60,000.
Limited Liability Company (Sociedad de Responsabilidad Limitada, S.R.L., or S.L.) in Spain
The Limited Liability Company, or Sociedad de Responsabilidad Limitada, in Spain is another type of Spanish stock company. Like the Sociedad Anónima, the Sociedad de Responsabilidad Limitada is an autonomous legal entity and shareholders are not responsible for debts incurred by the company. All sociedades must pay Company Tax (Impuesto sobre Sociedades). Yet the Sociedad de Responsabilidad Limitada’s minimum required investment is considerably less than for a Sociedad Anónima. (There are also different reporting requirements for each type of sociedad.) In addition, a Sociedad de Responsabilidad Limitada’s shares cannot be traded on the stock exchange. To start a Sociedad de Responsabilidad Limitada in Spain, you will need to draft and notarize articles of incorporation and have a minimum available investment of €3,000.
The easiest and most common business entity to set up and get your Spanish company up and running is the the Sole Trader (Empresario Individual) business. This business is legally considered one and the same with the person running it. For that reason, the business owner does not have to file Corporate Income Tax forms (just the normal Impuesto sobre la Renta de las Personas Físicas or IRPF, which should be filed anyway) and is responsible for all debts incurred by the company. There is no minimum financial investment to start a Sole Trader (Empresario Individual) business in Spain.
Partnership (Sociedad Civil) in Spain
The Partnership, or Sociedad Civil, in Spain is a business relationship formed by two or more people who contribute money, equipment and/or labour and divide the profits amongst themselves as they have agreed. Accordingly, any debts or financial obligations will also be divided amongst the parties. The Sociedad Civil doesn’t actually need to become an “official” business except in certain cases. For that reason, no minimum financial investment is required.
An “official” Sociedad Civil in Spain must create a partnership agreement for the business (contrato de constitución) that is then signed before a notary, and register to pay IAE Tax (Impuesto de Actividades Económicas), though in some cases the Sociedad Civil may not be required to pay it. The business name should include the words Sociedad Civil.
BRANCH / SUBSIDIARY
To open a branch, a public deed must be signed and registered at the Mercantile Registry. Under Spanish foreign investment legislation, the branch must be allocated capital, although there is no minimum capital requirement.
The branch must have a legal representative with authority to manage its affairs. It does not have any formal managing or administrative bodies as such, and it largely operates as if it were a company in its commercial dealings with third parties.
The choice between forming a branch or a subsidiary in Spain may be influenced by commercial considerations (e.g., a subsidiary might provide a more “stable” presence than a branch or by considerations of legal certainty (a subsidiary limits the shareholder’s liability).
Broadly speaking, the requirements, formalities and costs related to opening a branch are very similar to those for forming a subsidiary.
A representative office is not a separate legal entity from its parent company, and it does not have any formal managing bodies, since management duties are delegated to the office’s representative. In principle, a representative office cannot trade and its business activities are essentially coordination, assistance, etc. The non-resident company is liable for the debts incurred by its representative office.
Branch vs. Representative office:
Branches are allowed to conduct a much broader range of activity than representative offices. Branches can buy and sell goods, build things, render services, and generally everything that a regular business can do. A representative office, on the other hand, cannot regularly buy and sell goods or offer services. As its name says, a representative office represents its foreign parent in Spain.
MAIN TAXES IN SPAIN
In the Spain you have two main types of tax:
- Corporate Tax
- Personal Income Tax
There may be additional taxes for certain levels of income, such as Capital Gains Tax and Inheritance Tax, among others.
Note: The new withholding rate for the professional activities from September 1, 2012 increases to 21% until 31/12/2013. As of 01/01/2014 it will return to 19%, unless we advise of modifications.
The company tax return must be filed within 6 months and 25 days after end of accounting period.
Payment by instalments of company tax is in April, October and December. As a general rule, each instalment is 18% of the previous year’s company tax liability.
A separate method of calculation applies to large companies whose turnover in the previous year exceeds a set limit.
VAT: Value Added Tax
At present, the general rate of VAT (I.V.A in Spain) is 19% (from September 1, 2012 increases to 21% until 31/12/2013. As of 01/01/2014 it will return to 19%). This is the rate charged on most supplies. There is also a reduced rate for certain products and services of 8% and 4%.
Registration with the Tax Office is compulsory for companies or individuals selling products or services which fall within the scope of this tax. It is important to point out that, unlike in some countries, businesses supplying goods or services subject to VAT must register from commencement of trade, as there is no lower threshold limit.
PERSONAL INCOME TAX
In Spain there is a progressive Personal Income Tax. Residents are subject to tax on their worldwide income and assets. The taxpayer’s income consists of:
- income from employment
- income from capital
- income from business
- capital gains and losses
- imputed income as laid down by law
In Spain the tax due date is 31st of December each year.
Tax rate: There are two Personal Income Taxes – for country and for autonomous community. The tax rates are progressive.
The general tax rates in Spain are as follows:
15.66 % up to €17,707
18.27 5 % €17,708 – €33,007
21.14 % €33,008 – €53,407
27.13 % €53,408 and over
If the autonomous community has not adopted the abovementioned scale, the following complementary rates will apply:
8.34 % up to €17,707
9.73 % €17,708 – €33,007
12.86 % €33,008 – €53,407
15.87 % €53,408 and over
The Spain law on Income Tax provides deductions, for instance:
- deduction for rent of habitual place of residence – taxpayers with a tax base lower than € 24,020 may claim a tax deduction of 10 % of the amounts paid during the homes renting period
- deduction for gifts – 10 % of the sums donated to legally recognized foundations
- deduction for maternity – deductions for women with children younger than 3 years, up to € 1,200 per year per child younger than 3 years
- deduction for child birth – € 2,500
CAPITAL GAINS TAX
Capital Gains Tax (CGT) in Spain for residents is a maximum of 15%, calculated as part of their Spanish Income Tax. As of January 1st 2007, Capital Gains Tax for non-residents has been reduced from 35% to 18%. 3% of the declared value of the property will be retained at the Notary on the day contracts are signed. The remaining amount is deductible with the subsequent year’s tax return. Any expenses incurred during the property sale (ie., Notary and solicitor’s fees) can be offset against this.
Inheritance Tax is a huge concern for anybody who owns property in Spain. Inheritors fall into four categories with the allowances conceded shown in brackets:
Group 1: Descendants and adopted children under 21. The older the child, the more tax to pay (15,956.87€). Group 2: Descendants and adopted children over 21, spouses, parents and adoptive parents (15,956.87€). Group 3: Brothers/sisters, nephews/nieces, aunts/uncles (7,993.46€). Group 4: Relatives in fourth degree or friends (No allowances).
Calculating Inheritance tax
Once the above allowance has been deducted, the Tax Authorities apply the following tax rates on the remainder of the inheritance, with Group 1 paying the least and Group 4 the most.
|0 up to 7,993.46€||7.65|
|Up to 15,980.91€||8.50|
|Up to 23,968.36€||9.35|
|Up to 31,955.81€||10.20|
|Up to 39,943.26€||11.05|
|Up to 47,930.72€||11.90|
|Up to 55,918.17€||12.75|
|Up to 63,905.62€||13.60|
|Up to 71,893.07€||14.45|
|Up to 79,880.52€||15.30|
|Up to 119,757.67€||16.15|
|Up to 159,634.83€||18.70|
|Up to 239,389.13€||21.25|
|Up to 397,55.08€||25.50|
|Up to 797,555.08€||29.75|
Enquire About Our Accountacy & Tax Services
For further information, please contact us on +44 (0)208 421 7474 or fill in the form below: