Corporate tax is often the first number a foreign company wants to pin down before committing to Spain. The headline rate is easy to find, but the rate alone tells you little about what you will actually pay. Here is how corporate tax works in Spain, the rates that apply and the points that matter most to a foreign-owned company.
How corporate tax works in Spain
Spanish corporate tax is charged on the company's profit, adjusted by the tax rules, and is declared annually after the financial year closes. During the year the company also makes payments on account, so the final settlement is the difference between what has already been paid and what is due. The accounting result is the starting point, which is why clean books matter as much as the rate itself.
The rates
The general corporate tax rate in Spain is 25 per cent. Small companies with a turnover below one million euros apply a reduced rate, and there are transitional reduced rates for other SMEs. Newly created companies that make a profit benefit from a reduced rate of 15 per cent in their first profitable periods, subject to conditions. Rates and conditions change from year to year, so it is worth confirming the current figures for your case rather than relying on a number seen online.
Payments on account
Companies make payments on account of corporate tax during the year, calculated on either the previous year's result or the profit of the current period, depending on the method. For a company that is growing quickly, the method chosen can have a real effect on cash flow, so it is a decision worth making with advice rather than by default.
Deductions and incentives worth knowing
Spain offers incentives that reduce the effective rate, from deductions for research and development to the capitalisation reserve and the offset of prior-year losses. Not all of them fit every company, and applying them incorrectly creates more risk than saving. The value is not in knowing the full list, but in having someone identify which ones make sense for your business before the year closes.
Foreign-owned companies and double taxation
For a foreign-owned company, two questions go beyond the rate. How profits are repatriated to the parent, and how double taxation is avoided through the treaty network and the participation regime. Planned well, a group can move profit efficiently and legally. Planned badly, the same profit can be taxed twice. This is precisely where local advice pays for itself.
Get a first estimate with our corporate tax simulator, or book a call and we will review the rate and the incentives that apply to your company.
Frequently asked questions
What is the corporate tax rate in Spain?
The general rate is 25 per cent. Newly created companies with a profit can apply a reduced 15 per cent rate in their first profitable period and the next, subject to conditions. Rates can change, so confirm the current figures.
Do foreign-owned companies pay corporate tax in Spain?
A Spanish company pays corporate tax on its profits regardless of who owns it. Foreign ownership mainly raises additional questions about profit repatriation and avoiding double taxation, handled through tax treaties and the participation regime.
What are payments on account?
They are advance payments of corporate tax made during the year. The final annual return settles the difference between what has been paid and what is due.
