PRACTICAL TAX GUIDE TO INVEST IN SPAIN PRACTICAL TAX GUIDE TO INVEST IN SPAIN 1 MAIN TAXES ON INCOME • Corporate income tax - Name: Corporate Income Tax [Impuesto sobre Sociedades] - General rate: 25% - Basic legislation: Law 27/2014, of 27 November 2014, on Corporate Income Tax Royal Decree 634/2015, of 10 July 2015, approving the Regulation on Corporate Income Tax • Tax on the income of resident individuals - Name: Personal Income Tax [Impuesto sobre la Renta de las Personas Físicas] - Rate: (i) general rate: 19% to 45%; (ii) savings income rate: 19% to 23% - Basic legislation: Law 35/2006, of 28 November 2006, on Personal Income Tax Royal Decree 439/2007, of 30 March 2007, approving the Regulation on Personal Income Tax • Tax on the income of non-resident individuals and entities - Name: Non-Resident Income Tax [Impuesto sobre la Renta de No Residentes] - Rate: (i) general: 24%; (ii) dividends: 19%; (iii) interest: 19%; (iv) royalties: 24%. - Basic legislation: Royal Legislative Decree 5/2004, of 5 March 2004, approving the consolidated text of the Non-Resident Income Tax Act Royal Decree 1776/2004, of 30 July 2004, approving the Regulation on Non-Resident Income Tax TAX AUTHORITY: SPANISH TAX AGENCY [AGENCIA ESTATAL DE LA ADMINISTRACIÓN TRIBUTARIA] • Website: https://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio.shtml PRACTICAL TAX GUIDE TO INVEST IN SPAIN 2 DOUBLE TAXATION CONVENTIONS • State Tax Agency (“STA”) website: https://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio/La_Agencia_Tributaria/Normativa/Fiscalidad_Internacional/C onvenios_de_doble_imposicion_firmados_por_Espana/Convenios_de_doble_imposicion_firmados_por_Espana.shtml • Website of the Finance Ministry: http://www.hacienda.gob.es/es-ES/Normativa%20y%20doctrina/Normativa/CDI/Paginas/cdi.aspx SPANISH LAWS AND TAX RULINGS • Legislation (website of the Official State Gazette – STA): https://www.boe.es/legislacion/codigos/codigo.php?id=49&modo=1&nota=0&tab=2 • Tax rulings (website of the General Directorate of Taxes): http://www.minhap.gob.es/es-ES/Normativa%20y%20doctrina/Doctrina/Paginas/ConsultasDGT.aspx PRACTICAL TAX GUIDE TO INVEST IN SPAIN 3 CONTENTS 1. SUMMARY OF THE MAIN TAXES AND THEIR RATES ................................................................................................... 6 1.1 Direct taxes ......................................................................................................................................................................... 6 1.1.1 Corporate Income Tax [Impuesto sobre Sociedades] (“CIT”) .............................................................................................. 6 1.1.2 Personal Income Tax [Impuesto sobre la Renta de las Personas Físicas] (“PIT”) .............................................................. 6 1.1.3 Non-Resident Income Tax [Impuesto sobre la Renta de No Residentes] (“NRIT”) ............................................................. 6 1.2 Indirect taxes ....................................................................................................................................................................... 7 1.2.1 Value Added Tax [Impuesto sobre el Valor Añadido] (“VAT”) ............................................................................................ 7 1.2.2 Transfer Tax and Stamp Duty [Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados] ............. 7 1.3 Other taxes .......................................................................................................................................................................... 8 2. GENERAL FRAMEWORK .................................................................................................................................................. 8 2.1 Interpretation of the Tax Law ............................................................................................................................................... 8 2.2 Anti-tax avoidance laws ....................................................................................................................................................... 8 2.3 Limitation period .................................................................................................................................................................. 8 2.4 Penalties .............................................................................................................................................................................. 9 2.5 Tax offences ........................................................................................................................................................................ 9 3. GENERAL RULES ON INTERNATIONAL TAXATION ...................................................................................................... 9 3.1 Double Taxation Conventions (“DTC”) ................................................................................................................................ 9 3.2 Methods to avoid internal and international double taxation ............................................................................................... 9 3.3 Related transactions (transfer pricing rules) ...................................................................................................................... 10 3.4 Controlled foreign corporation rules (“CFC rules”) ............................................................................................................ 11 4. MAIN TAXES LEVIED ON A LEGAL PERSON ............................................................................................................... 11 4.1 Corporate Income Tax ....................................................................................................................................................... 11 4.1.1 General Information ........................................................................................................................................................... 11 4.1.2 Tax rate ............................................................................................................................................................................. 11 4.1.3 Taxable income ................................................................................................................................................................. 11 4.1.4 Filing and payment ............................................................................................................................................................ 11 4.1.5 Deductible expenses ......................................................................................................................................................... 12 4.1.6 Non-deductible expenses .................................................................................................................................................. 12 4.1.7 Limits on deducibility of ordinary financial expenses ......................................................................................................... 12 4.1.8 Offsetting of the tax losses carried forward ....................................................................................................................... 13 PRACTICAL TAX GUIDE TO INVEST IN SPAIN 4 4.1.9 CIT tax regime for groups of companies ........................................................................................................................... 13 4.2 Withholding tax to third parties that must be carried out by the company ......................................................................... 13 4.2.1 Payment of resident employees and self-employed workers subject to withholding ......................................................... 13 4.2.2 Withholdings on payments to non-residents...................................................................................................................... 13 4.3 Taxes on sales and transfers of corporate assets ............................................................................................................. 14 4.4 Other relevant taxes .......................................................................................................................................................... 14 4.4.1 Real Estate Tax (Impuesto sobre Bienes Inmuebles) ....................................................................................................... 14 4.4.2 Tax on Business Activities (Impuesto sobre Actividades Económicas) ............................................................................. 14 5. FOREIGN INVESTMENT .................................................................................................................................................. 14 5.1 Commercial and legal openness to foreign investment ..................................................................................................... 14 5.2 Investors duties ................................................................................................................................................................. 15 5.2.1 Notification ......................................................................................................................................................................... 15 5.2.2 Prevention of money laundering ........................................................................................................................................ 15 5.3 Investors resident in tax havens