SPAIN 2016
• • • • • •
Web Site: www.shermannigretti.it E-mail: info@shermannigretti.it Tel. +39 (0)2 7722951 Mob. +39 335 6030346 Twitter: @ShermanNigretti Linkedin: Gianmauro Sherman Nigretti
GEOGRAPHY AND POPULATION CAPITAL:
MADRID
POPULATION:
47,7 MILLION
POLITICAL SYSTEM:
PARLAMENTARY MONARCHY
FORMS OF BUSINESS ORGANIZATIONS There are many ways in which a business may be set up in Spain. Joint stock companies - This type of company, commonly known as an SA, is normally used by medium to large corporations. This kind of company is ruled by the Spanish Corporate Enterprises Act. The responsibility of the shareholders in this type of company is, in principle, limited to their shareholding in the capital of the company. Limited liability companies - This type of company, commonly known as an SL, is normally used by small- to medium sized corporations. This kind of company is ruled by the Spanish Corporate Enterprises Act. The responsibility of the participants is, in principle, limited to their participation in the capital of the company. Branches - The main difference between a branch and a subsidiary is that a branch is not an independent legal entity from the main company, while a subsidiary is legally independent. This kind of company is ruled by the Spanish Corporate Enterprises Act. This means that, among other considerations, the accounts of a branch are part of the accounts of the company, and that a branch does not limit its liability to the assets assigned to the branch, but to all company assets.
General partnership - This is one of the partnerships which can be used in Spain. This kind of company is ruled by the Spanish Code of Commerce. This type of partnership is rarely used. The partners have joint, several and unlimited liability for the debts of the partnership. The General Partnership does not require having a minimum share capital. Limited partnership - This is another type of partnership used in Spain. This kind of company is ruled by the Spanish Corporate Enterprises Act. The applicable subsidiary regime will be the one of the Joint Stock Company. The peculiarity of this partnership is that it has two categories of partners, those with unlimited liability and those with limited liability.
ACCOUNTING Since 1990, Spanish domestic law has incorporated the rules and regulations of the EEC Fourth Directive on accounting, the reporting requirements of the EEC Seventh Directive on consolidated accounts for groups of companies, and also the EEC Eighth Directive on the control of accounts and external audit. All businesses are required to keep adequate accounting records in accordance with the Code of Commerce and the Spanish General Accounting Plan. All companies registered in the company registry are obliged to file an annual reporting pack including a balance sheet, profit and loss account, notes to the accounts and statement of changes in the net equity. Additionally, for those companies that are obliged to file full accounts, is mandatory to include a statement of cash flows and a director’s report.
CORPORATE TAXATION The general corporate income tax rate in Spain was 28% for 2015 and 25% for 2016 onwards. There is a reduced tax rate of 15% applicable to new entities carrying out business activities in the first 2 years in which the company makes profits. There are a number of tax credits and relieves that can often reduce the overall tax liability provided certain requisites are met. Corporation tax is payable within the six months and 25 days following the year end. However, advance payment is required three times a year at a rate of 18% of the tax paid for the previous year. Spanish international holding companies - From 1 January 1996, Spain joined those countries that have already included international holding companies in their tax legislation, known as ETVEs. Spanish international holding companies are not taxed for dividends or share of profits received from abroad as well as capital gains deriving from a share portfolio disposal, as long as the shares or participations have been held for at least one year before the dividend is payable and the participation is of at least 5% or 20 million Euro acquisition cost.
INDIVIDUAL TAXATION The income tax law introduces the concept of total income as the taxable base. There is a general reduction per taxpayer of EUR 5,550. There are further reductions of: •
EUR 1,150 where the taxpayer is over 65
•
EUR 1,400 where the taxpayer is over 75
•
Between EUR 3,000 - 9,000 on the taxable base for disabled taxpayers, depending on their level of incapacity.
Further reductions are allowed for employess. Non residente income tax - Non-resident’s income is subject to a flat rate tax of 24% on gross income EU tax residents can benefit from a reduced rate of 19% which is applicable to certain type of income and they can deduct expenses if certain requisites are met.
VAT AND INDITECT TAXES VAT - The VAT rules and regulations are based on the EU Sixth Directive. Business transactions are taxed at 21% and certain basic products and services at 10% or 4%. Exports and similar services are not subject to tax. Tax on property transfer - All transfers of land and buildings, under any title of transfer except succession and donation, are taxed at the rate from 6% to 10% of the value depending on which Autonomous Community is the property, except in the case of first sales from a real estate promoter on which VAT is payable. The rate of VAT in these cases is 10% on houses and 21% on urban land. Transfer of items other than land, buildings and rights over real estate, are taxed at 4%. Public documents that require registration are taxed at 1%. Tax on capital - Incorporation and share capital increases are exempt from capital duty. No capital duty applies either to reorganizations such as mergers, spin off etc. Dissolution is subject to 1% capital duty on the amounts reimbursed to the shareholder upon liquidation. Inheritance and gift tax - Inheritance and gift tax is only levied on individuals and not on companies. Municipal tax on land transfer - Every time that land is transferred, regardless of whether it is built on, the municipality levies a tax on the increase in value since the land was last transferred. The applicable tax rates vary according to the municipality.
Municipal tax on properties - An annual tax based on the cadastral value is payable to the municipal authority. Tax rates vary from 0.4% up to 1.30% (for urban property) and according to the municipality. Municipal tax on business activities - An annual tax on business activities is payable to the municipal authorities. Tax payable depends on the type of activity, the category of the street where the business is located and the size of the municipality.
DISCLAIMER This publication must not be regarded as offering a complete explanation of the taxation and corporate matters that are contained within this publication. This publication has been prepared on the express terms and understanding that the publishers are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication. The publishers and the authors expressly disclaim all and any liability and responsability to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person, and ensuring that such edvice specifically relates to their particular needs.