If you’re planning to start or expand a business in Spain, understanding the country’s tax system is essential. Spain offers strong access to the European market and a competitive environment for many industries, but its tax system can be complex—especially for those unfamiliar with local rules.
At Lawhill, we help international entrepreneurs confidently navigate tax obligations from day one. Here’s what you need to know.
1. Corporate Income Tax (Impuesto de Sociedades)
If you set up a company in Spain (e.g., an SL or SA), you’ll pay Corporate Income Tax on your profits.
- Standard rate: 25%
- New companies: 15% for the first two years with positive profits
- Tax is paid annually, with quarterly pre-payments throughout the year
It’s important to plan ahead for corporate tax obligations and deductibles—professional advice can save both time and money.
2. VAT (IVA – Impuesto sobre el Valor Añadido)
VAT is a value-added tax applied to most goods and services. If your business is VAT-eligible, you’ll need to register and submit quarterly filings.
- Standard rate: 21%
- Reduced rate: 10% (e.g., restaurants, transport)
- Super-reduced rate: 4% (e.g., basic food, books)
Most companies collect VAT from clients and then deduct the VAT they’ve paid on expenses.
3. Personal Income Tax for Sole Traders (Autónomos)
If you register as an Autónomo (freelancer/self-employed), you’re taxed through Personal Income Tax (IRPF) rather than corporate tax.
- Progressive tax rates between 19% and 47%
- Quarterly advance payments are required
- Social security contributions also apply
Foreign freelancers must also keep clear records and issue proper invoices with retained tax.
4. Social Security Contributions
Whether you are a company owner or a freelancer, Social Security (Seguridad Social) contributions are mandatory.
- Employers must register and pay contributions for each employee
- Autónomos must pay a monthly fee based on income, with a minimum rate starting around €300/month (subject to current regulations)
These contributions fund public healthcare, pensions, and other benefits.
5. Double Taxation Treaties
Spain has signed double taxation agreements with over 90 countries, which prevent you from being taxed twice on the same income. If your home country is on the list, this can significantly reduce your overall tax burden.
To benefit, you’ll need to submit the correct documentation to Spanish tax authorities.
6. Annual Filing and Compliance
Businesses in Spain must submit regular tax declarations—monthly, quarterly, and annually. This includes:
- VAT returns (Modelo 303)
- Corporate tax returns (Modelo 200)
- Informative declarations (e.g., Modelo 390, 347)
- Employee withholdings (Modelo 111)
Missing deadlines or submitting incorrect filings can lead to fines, so working with a local accountant or advisor is highly recommended.
Make Tax Simple with Lawhill
Understanding Spain’s tax system is one thing—managing it well is another. At Lawhill, we guide foreign entrepreneurs through every tax obligation, helping you stay compliant and focused on what really matters: growing your business.
Need help with taxes in Spain?
Contact our team for clear, practical advice.
