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Did you know that in Spain, there are more than a dozen taxes that impact both individuals and businesses? Understanding the Spanish tax system is essential for effective financial management and for complying with your tax obligations properly.
In this guide, we will explore the various types of taxes in Spain that affect self-employed individuals, employees, and companies. We will also answer frequently asked questions to help you confidently navigate the complex Spanish tax landscape. Let’s get started!
Types of taxes in Spain
The Spanish tax system is composed of a wide variety of taxes, classified according to different criteria. Understanding this classification is crucial for identifying the tax obligations applicable to each taxpayer.
To begin, here is an overview of the main types of taxes in Spain:
General classification of taxes in Spain
Taxes in Spain are categorized as follows:
- Direct taxes: These are levied on the income or wealth of individuals and businesses. Examples include Personal Income Tax (IRPF) and Corporate Income Tax (IS).
- Indirect taxes: These apply to the consumption of goods and services, with Value Added Tax (VAT) being the most notable example.
- State taxes: Collected by the central government, such as IRPF and VAT.
- Regional taxes: Managed by the autonomous communities, including Inheritance and Gift Tax (ISD).
- Local taxes: Administered by municipal councils, such as Property Tax (IBI).
Taxes in Spain for self-employed workers and individuals
Self-employed workers and individuals in Spain are subject to various taxes, depending on their economic activity, income, and assets. Being aware of these taxes is essential to fulfilling your tax obligations and avoiding penalties.
The main taxes that affect this group of taxpayers are:
1. Personal income tax (IRPF)
IRPF is a direct and progressive tax applied to income earned by individuals. It applies to salaries, capital gains, business income, and other sources of revenue.
The IRPF brackets for 2025 are as follows:
- Up to €12,450: 19%
- From €12,451 to €20,200: 24%
- From €20,201 to €35,200: 30%
- From €35,201 to €60,000: 37%
- From €60,001 to €300,000: 45%
- Over €300,000: 47%
It is important to note that income tax is typically paid through payroll deductions for employees or through quarterly installments for self-employed individuals.
2. Capital gains tax
Capital Gains Tax is applied to the profits earned from the sale of assets, such as property or shares. The applicable rates for 2025 are:
- Up to €6,000: 19%
- From €6,001 to €50,000: 21%
- From €50,001 to €200,000: 23%
- From €200,001 to €300,000: 27%
- Over €300,000: 28%
Maintaining detailed records of transactions is crucial for accurately calculating capital gains and losses.
3. Wealth tax (IP)
Wealth Tax is levied on an individual’s net wealth, calculated as the difference between assets and liabilities. Although it is a state tax, its application and exemptions vary by autonomous community.
For example, in some regions, such as Madrid, there is a 100% exemption, while in others, tax rates range from 0.2% to 3.5%.
4. Inheritance and gift tax (ISD)
Inheritance and Gift Tax is applied to the transfer of assets and rights through inheritance or donation. Like the Wealth Tax, it is regulated by the autonomous communities, resulting in significant differences in exemptions and applicable rates.
It is advisable to consult the specific regulations of your region to understand your tax obligations if you receive an inheritance or a gift.
5. Value added tax (VAT)
VAT is an indirect tax levied on the consumption of goods and services. The rates applicable in 2025 are:
- General rate: 21%
- Reduced rate: 10% (applied to food, transportation, hospitality services, among others)
- Super-reduced rate: 4% (for essential products like bread, milk, medicines, books, newspapers, and social housing)
Self-employed workers must declare and pay VAT quarterly using form 303.
6. Non-resident income tax (IRNR)
IRNR is a tax on income earned in Spain by non-resident individuals and legal entities. The applicable rates depend on the type of income and the taxpayer’s country of residence. Taxpayers may benefit from double taxation agreements, which prevent being taxed twice on the same income.
It is essential to determine your tax residency correctly and understand the tax obligations that apply to your situation.
Taxes in Spain for companies
Companies in Spain are subject to several taxes that impact their profits, operations, and transactions. Understanding these taxes is crucial for effective tax planning and ensuring full compliance with legal obligations.
Here are the main taxes that affect companies in Spain:
1. Corporate income tax (IS)
Corporate Income Tax (IS) is applied to the profits earned by companies and other legal entities. For 2025, the applicable tax rates are as follows:
General rate: 25%
Companies with turnover of less than €1 million:
- First €50,000 of taxable income: 21%
- Remaining taxable income: 22%
- Newly created companies: 15% during the first two years with a positive taxable base
- Non-profit entities: 10%
- Investment companies and bank asset funds: 1%
It is important to note that there are various tax incentives available to encourage business growth and job creation, such as:
- Capitalization reserve: Allows companies to reduce taxable income by allocating profits to a reserve that cannot be distributed for a specified period.
- Deduction for investments in R&D: Provides a tax reduction for expenses related to research and development activities.
These incentives can significantly reduce a company’s tax burden if applied correctly.
2. Property transfer tax (ITP)
Property Transfer Tax (ITP) is charged on the transfer of assets and rights that are not subject to VAT, such as the sale of real estate between individuals. The applicable rates vary by autonomous community but generally range from 6% to 10%.
ITP also applies to other types of transactions, such as:
- Documented legal acts: Transactions that require notarial deeds, such as mortgages.
- Corporate transactions: Certain changes in corporate structure, including mergers and capital increases.
These taxes can impact companies depending on the nature of their transactions.
Understand and optimize your tax management in Spain
Understanding how much tax you pay in Spain and how the system works is essential to avoiding unpleasant surprises and optimizing your finances. Both individuals and companies need to be aware of their tax obligations, take advantage of available deductions, and ensure timely filing of tax returns.
A clear understanding of the Spanish tax system enables you to make informed financial decisions, minimize the tax impact on your income and assets, and stay compliant with all legal requirements. If you have any doubts, it is always advisable to consult with a tax advisor who can provide personalized guidance based on your situation.
Frequently asked questions about taxes in Spain
Below, we answer some of the most common questions about taxes in Spain, applicable to both individuals and companies:
Are there tax deductions for companies and individuals in Spain?
Yes, both companies and individuals can benefit from various tax deductions. Some of the most notable include:
– Deduction for investment in newly created companies: Up to 30% of the acquisition value of shares or holdings, with a maximum deduction of €100,000 per year.
– Deduction for energy improvement works in homes: Between 20% and 60% of the cost of the works, depending on the level of improvement in energy efficiency.
– Deduction for maternity or paternity: Up to €1,200 per year per child under the age of three.
– Regional deductions: Each autonomous community can establish its own deductions for Personal Income Tax (IRPF), so it is important to consult the specific regulations of your region.
Where can i get more information about taxes in Spain?
You can find official information about taxes in Spain on the website of the Spanish Tax Agency (Agencia Tributaria) at www.agenciatributaria.es. The site provides updated guides, tax return forms, and access to personalized consultations.
If you prefer personalized advice, you can also consult a tax advisor who can help you navigate your tax obligations based on your specific situation.
