Corporate Tax (Impuesto de Sociedades)

What Is Corporate Tax in Spain?

Corporate Tax — known in Spain as the Impuesto de Sociedades (IS) — is the primary tax on company profits. It applies to all entities incorporated under Spanish law and to foreign entities that operate through a permanent establishment (PE) in Spain. The tax is governed by the Ley 27/2014 del Impuesto sobre Sociedades and administered by the Spanish Tax Agency (AEAT).

Who Must Pay It?

Any legal entity resident in Spain is subject to Corporate Tax. This includes:

• Sociedades Limitadas (SL) and Sociedades Anónimas (SA) — the two most common corporate forms
• Foundations, associations, and cooperatives (with specific regimes)
• Foreign companies operating through a Spanish branch or PE

Sole traders (autónomos) are excluded: they pay Personal Income Tax (IRPF) instead.

Tax Rates

Taxable Base and Key Deductions

The taxable base starts with accounting profit and is then adjusted for items that Spanish tax law treats differently from accounting standards (GAAP/IFRS). Key adjustments include:

• Depreciation: Spanish rules set maximum rates by asset category, which may differ from those used in accounts.
• Non-deductible expenses: Fines, penalties, and certain financial costs above the EBITDA threshold (30% limit) are added back.
• Double-taxation exemption: Dividends and capital gains from qualifying subsidiaries (domestic or foreign) may qualify for a 95% exemption — crucial for holding structures.
• R&D tax credits: Spain offers generous deductions of 25–42% on qualifying R&D expenditure, among the highest in the EU.

Filing Obligations

Corporate Tax is filed annually using Modelo 200, due within 25 calendar days following the six months after the tax year-end. For companies with a calendar tax year, the deadline is typically 25 July. Advance instalment payments (Modelo 202) are required in April, October, and December.

How It Compares Internationally

For foreign investors, Spain’s 25% headline rate is in line with the EU average. However, the effective rate can be significantly lower thanks to deductions, credits, and the participation exemption regime. Companies moving from the UK (25% since 2023), Germany (approx. 30% combined), or the US (21% federal) will find Spain broadly competitive, particularly when R&D credits or holding structures are involved.

Common Pitfalls for Foreign-Owned Companies

1. Transfer pricing: Transactions between a Spanish subsidiary and its foreign parent must be at arm’s length and properly documented — the AEAT scrutinises these closely.
2. Thin capitalisation / interest limitation: Net financial costs exceeding 30% of EBITDA are not deductible in the current year (they carry forward).
3. Controlled Foreign Company (CFC) rules: Spain’s CFC provisions can attribute foreign subsidiary income back to a Spanish parent under certain conditions.

How BMC Can Help

Our tax team manages the full Corporate Tax compliance cycle: from year-end accounting adjustments and tax provision calculation to Modelo 200 preparation and filing. We also advise on structuring to maximise legitimate deductions and ensure transfer-pricing documentation meets AEAT requirements.