Spain

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Tax Policy

TAX POLICY

Income Tax Rate 45%

Corporate Tax Rate 30%

Sales Tax / VAT Rate 18%

Individual Income Tax

Spain's individual income tax rates for 2011 are progressive, from 24% to 45%.

Income Tax Rates for the year ended 31st December 2011

From (euro)

To (euro)

State %

Local %

Total %

0

17,707

12

12

24

17,707

33,007

14

14

28

33,007

53,407

18.5

18.5

37

53,407

120,000

21.5

21.5

43

120,000

175,000

22.5

Note 1

Note 1

175,000 +

 

23.5

Note 2

Note 2

Note 1: The autonomous region tax varies depending on the region: typically 22.5% - 23.5%

Note 2: The autonomous region tax varies depending on the region: typically 23.5% - 24.5%

Corporate Tax

Spain's corporate tax rate for 2011 is 30%.

For small and medium sized companies, there is a reduced rate: 25% for profits up to 120,202 Euros, 30% for profits above this.

A company is defined as small or medium sized if the net turnover in the previous year was less than approximately 3 million Euros.

Capital Gains

Capital gains of companies are added to the regular income and are taxable at 30% rate. Under certain terms there is a participation exemption for sale of shares of a subsidiary.

Individuals

Pay 19% for the first lower income of up to EUR 6,000 and 21% for the balance exceeding EUR 6,000.

Tax Deductions

Losses are carried forward for 15 years. There is no carry back of losses.

Depreciation is deducted using the straight line method or the declining balance method which is allowed for new tangible assets having estimated life of more than three years.

Some rates in the straight line method are:

Computers- 26%

Machinery- 12%

Vehicles-16%

Buildings-3

There is company consolidation for tax purpose, subject to certain terms.

Thin capitalisation rules relate to interest expenses to non EU parties as dividend when the debt to equity ratio exceeds 3:1 ratio.

Bad debts are tax deductible up to 1% of the total bebtors.

Real Estate Transfer Tax

Companies pay a 7% transfer tax when buying a real estate from private individuals.

Real Estate Property Tax

The annual tax is imposed by the local authority, the rates change from city to city. The rates are 0.5% -1% of the market value.

Inheritance and Gift Tax

The tax is imposed on Spanish heirs at rates ranging up to 34%.

IVA (VAT) Rates

IVA is charged at 18% on most goods and services in Spain, but not everything gets hit with the full 18%, and the situation is different for property.

Reduced rate ( 8% )

·         Passenger transport

·         Toll road

·         Hotels accomodation

·         Restaurants

·         Tickets for cultural performances and entertainment

·         Sporting events of an amateur nature

·         Exhibitions and fairs

·         Animal medicine

·         Health products and equipment

·         Flowers, plants, seeds, bulbs and cuttings

·         Non basic food products and water

·         Rubbish collection and treatment

·         Pest control

·         Wastewater treatment

Super-reduced rate (4%)

·         Books, newspapers and magazines (Electronic equivalents taxed at full rate).

·         Scores, maps, sketch pads and other items that may only be used as teaching materials, except electronics.

·         Human medicine

·         Basic foodstuffs (bread, milk, cheese, eggs, fruits, vegetables, cereals and potatoes)

Exempt from IVA altogether:

·         Education, as long as it is provided by the state or licensed bodies

·         Tutoring on subjects that are included in the curricula at all educational levels

·         Sporting services provided by public bodies or associations

·         Cultural services such as museums, libraries, seminars and conferences

·         Artists, writers, composers and translators of artistic and scientific work

·         Insurance

·         Postal services

IVA / VAT on property sales

New property sales are charged to IVA at the reduced rate i.e. 7% soon to rise to 8%

Sales of land for property development are charged at the full rate i.e. 16% soon to rise to 18%

Secondhand property sales also attract a tax of 7% currently but that is not actually IVA but a transfer tax called Impuestos sobre Transmisiones Patrimoniales (“ITP”). ITP is not set at national level but rather autonomous community level. Some communities may wish to raise their ITP rate to 8% when IVA rises and one, Cantabria, has already said in intends to. Another though, Galicia, has said that intends to maintain ITP at 8%. Most have not indicated what will happen either way.

Neither of these taxes is “stamp duty” like we have in the UK. There is a form of stamp duty in Spain called AJD (Actos Juridicos Documentados) on all notarisation of documents. AJD though is only payable on land and new property sales. The rate is a minimum of 0,5% of the sale price but can be up to 1% if the autonomous region so decrees, and most do.

VAT reports are filed and paid on a quarterly basis. for firms having an annual turnover exceeding EUR 6 millions the filing is monthly.

Exports are exempt from VAT.

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