Spain Tax Laws and Tax System 2012

Tax in Spain

Last partial update, May 2011

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

Personal annual tax rates 2011 (EUR)

Income (EUR)	%
1-17,707	24
17,708-33,007	28
33,008-53,407	37
53,408-120,000	43
120,001-175,000	44
175,001 and over	45

Note: The tax rates include Spain's state tax and local tax.

From 2011 in certain autonomous regions in Spain the top marginal income tax rate is up to 49%.

Corporate Tax: Spain's corporate tax rate for 2011 is 30%. Certain small companies pay a lower corporate tax rate of 25% for income of up to EUR 120,202.
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.

Residence

A foreign company is resident if incorporated in Spain or have its actual management in Spain.
An individual is resident when staying in Spain for more than 183 days in a tax year or when the center of business life is in Spain.

Spain 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.

Spain Personal Credits and Deductions

For Spanish residents there is a basic deduction of EUR 5,151 per year. The sum is increased for people aged 65 or more with additional deduction for other dependent family members and disabled people.
Deductions are also permitted for payments to spanish pension plans, up tp a limit, and for alimony payments.
15%of the total purchase price of the main residence is tax deductible, up to a limit.
10% of donations are deductible, subject to a ceiling.
For individuals, dividend income of up to EUR 1,500 per year is tax exempt.

Deduction of Tax at Source

In Spain tax is deducted at source from the following payments to non residents:
Dividend- 19%.
Interest- 19%.
Royalties- 24%.
Branch remittance to head office- 19%.

Note: when relevant the tax withholding rates are subject to EC directive or double tax treaties.

Social Security

The contributions by the employer and the employee are subject to to ceiling defined by law.

Employer: 23.6% of the gross salary.
Employee: 4.7% of the gross salary.

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