Tax

The standard rate of Value Added Tax (VAT) in Spain is set at 21%, applying to the vast majority of commercial supplies of goods and services.

VAT is levied on all activities within Spanish territory (excluding the Canary Islands, Ceuta and Melilla), applying the following rate structure:

• Standard Rate (21%): Applicable by default to all goods and services not expressly covered by preferential schemes.
• Reduced Rate (10%): Reserved by law for a specific list of exempt transactions.
• Super-reduced rate (4%): Applicable on an exceptional basis to certain goods and services considered to be of significant public interest and essential needs.

Corporate restructuring transactions in Spain may qualify for a special corporate tax deferral regime that neutralises the tax impact of the transaction.

This tax neutrality regime allows international corporate transactions to be structured without generating immediate taxation on the income earned by the individuals or entities involved. For its application, the law requires strict compliance with the following parameters:

• Eligible transactions: The deferral applies to mergers, demergers, non-cash contributions of business branches, exchanges of securities and changes of registered office of European companies between Member States.
• Valid economic reason: The corporate restructuring must not have tax fraud or evasion as its primary objective.
• Prohibition on purely tax-driven advantages: The transaction must be carried out solely for valid economic reasons, and not for the sole purpose of obtaining a tax advantage.

The Foreign Securities Holding Entities (ETVE) regime is a highly efficient special tax vehicle for holding companies, designed to exempt foreign-source dividends and capital gains from taxation.

The ETVE acts as an ideal platform for channelling international investments, offering the following tax shield:

• Entry exemption: Elimination of international double taxation on dividends and income derived from the transfer of shares in non-resident companies.
• Exit exemption (Dividends): Dividends distributed to non-resident shareholders of the parent company out of exempt income are not considered to have been obtained in Spain and are therefore exempt from Non-Resident Income Tax (NRIT).
• Exit exemption (capital gains): Capital gains realised by a foreign shareholder on the transfer of their shareholding in the ETVE through an international transaction are also exempt from NRIT.

To apply the exemption on income from foreign subsidiaries, the ETVE must meet mandatory requirements of a minimum 5% shareholding, a one-year holding period and equivalent taxation in the jurisdiction of origin.

Spanish regulations require these concurrent criteria to ensure that subsidiaries are subject to comparable taxation. The technical conditions are:

• Minimum shareholding: The parent holding company must hold a stake of at least 5% in the capital of the foreign subsidiary.
• Holding period: This shareholding must have been held continuously for at least one year prior to the date on which the dividend becomes payable or the transfer of the securities takes place.
• Taxation at source: The foreign subsidiary must be subject to a tax identical or analogous to Spanish Corporation Tax (CIT), requiring a nominal tax rate of at least 10%.

Dividends distributed by an ETVE to its foreign shareholders are not subject to withholding or payment of Non-Resident Income Tax (NRIT), provided they derive from previously exempt income.

This exit exemption is one of the major corporate strengths of the ETVE regime. When distributing profits to non-resident shareholders, Spanish tax law assumes that this income has not been earned within Spanish territory, thereby neutralising the tax burden on repatriation.

However, there is a strict anti-avoidance measure applicable to these transactions:

Tax Haven Restriction: The NRIT exemption lapses automatically and will not apply if the shareholders receiving the dividend are resident, for tax purposes, in jurisdictions legally classified as non-cooperative (former tax havens).

Capital gains realised by a non-resident shareholder upon transferring their stake in a Spanish ETVE in an international transaction are fully exempt from Non-Resident Income Tax (NRIT). At Seegman, we structure transactions for foreign companies, ensuring that exits from Spanish holding vehicles are executed with maximum profitability and without tax friction.

This exemption applies because the regulations do not consider such income to have been derived in Spain. As in the case of dividend payments, the divestment must comply with the following proviso:

Exclusion clause: The tax protection afforded by the exemption will not apply if the non-resident investor or partner transferring the shareholding is resident for tax purposes in a non-cooperative jurisdiction.

An individual is considered a tax resident in Spain, and therefore subject to personal income tax on their worldwide income, if they spend more than 183 days in the country or if their main centre of economic interests is located in Spanish territory.

The fulfilment of just one criterion is sufficient to establish tax residence, triggering the taxpayer’s global taxation. The rules for triggering taxation work as follows:

• Residence rule: This involves residing in Spain for more than 183 days during the calendar year. Sporadic absences count towards this calculation, unless the taxpayer can conclusively prove their tax residence in another jurisdiction.
• Centre of economic interests: This applies where the main centre or base of the taxpayer’s business or professional activities, or the centre of their economic interests, is located in Spain, either directly or indirectly.
• Legal presumption regarding family: It is presumed that residence in Spain exists if the spouse (not legally separated) and dependent minor children have their habitual residence in the country, although evidence to the contrary is admissible.

The Spanish personal income tax system divides the tax base into two blocks with asymmetric taxation: general income is taxed at a progressive rate reaching 47%, whilst savings income benefits from more moderate rates, capped at 30%.

The dual structure of personal taxation has a decisive impact on the remuneration of founders and investors:

• General Income (General Tax Base): Includes income from employment, business activities and property income. It is taxed at aggregate progressive rates (national and regional) ranging from 19% to 47%, with variations possible depending on the autonomous community.
• Savings Income (Savings Base): This covers dividends, profit distributions, interest and capital gains arising from the transfer of assets.

The following fixed progressive scale applies at national level:

The special impatriate tax regime allows professionals relocating to Spain to be taxed at a flat rate of 24% on the first €600,000 of their employment income, exempting their worldwide income and operating under the rules of the Non-Resident Income Tax (NRIT) for six years.  This exceptional scheme excludes taxation in Spain on income earned abroad, unlike the standard personal income tax applicable to residents.

To benefit from this tax optimisation structure, the foreign investor or executive must strictly comply with the following legal requirements:

• Previous absence: Not having been a tax resident in Spain during the five tax years preceding the year of relocation.
• Reason for relocation: The corporate relocation must be due to an employment agreement, taking up a position as a director, working as a digital nomad, starting an entrepreneurial venture (start-up), or being a highly qualified professional providing R&D&I services (accounting for more than 40% of their income).
• Nature of income: Not receiving income that is legally classified as derived through a permanent establishment located in Spanish territory.

Foreign investors operating in Spain without a permanent establishment are taxed under the NRIT at a flat rate of 19% on dividends and capital gains of Spanish source. This tax applies exclusively to the gross amount of income obtained within Spanish jurisdiction, completely exempting the investor’s worldwide income from taxation. Spanish legislation establishes a strict categorisation for taxing capital inflows repatriated by non-residents.

The fixed tax rates applicable to the main sources of investment income are structured as follows:

• Dividends: 19% on distributed profits and other income derived from equity holdings in a company.
• General capital gains: 19% on the transfer or general disposal of assets and rights in Spain.
• Gains on funds: 19% applicable to capital gains arising from the transfer or redemption of units in collective investment undertakings.
• Interest: 19% on income obtained from the lending of own capital to third parties.

The “Temporary Solidarity Tax on Large Fortunes” applies exclusively to those taxpayers, whether tax residents or non-residents, whose net worth exceeds the legal threshold of €3 million. This state-level tax serves as an additional levy specifically designed for high net worth individuals.

Legal liability for this tax directly affects the following asset categories:

• Tax residents: They are liable for the entirety of their worldwide net wealth exceeding the €3 million threshold.
• Non-tax residents: They are liable only on that portion of their net wealth which is situated, or whose rights may be exercised, within Spanish territory, provided it exceeds €3 million.

Wealth Tax is levied on tax residents on their total worldwide wealth, whilst non-resident investors are taxed exclusively on assets located or rights exercisable within Spain. This wealth tax operates in tandem with the temporary Solidarity Tax on large fortunes. Both taxes are effectively levied on the same taxable event, with the Solidarity Tax established as an additional tax layer.

The relationship and technical application of these taxes are structured according to the following territorial connection principles:

• Tax Residents: Taxation on a personal basis on their total worldwide wealth under the Wealth Tax.
• Non-residents: Taxation based on real obligation, strictly limited to assets and rights situated or exercisable within Spanish jurisdiction.
• Tax Overlap: The Solidarity Tax operates in a coordinated manner by imposing an additional surcharge applicable to both residents and non-residents whose applicable net wealth exceeds 3 million euros.

The exact legal deadline for assessing and paying Corporation Tax (CIT) expires 25 calendar days after the six-month period following the date of accrual, which coincides with the end of the financial year. The CIT tax period aligns with the corporate taxpayer’s financial year, which may not exceed 12 months and usually coincides with the calendar year. The tax becomes due automatically on the last day of that financial year.

The corporate timetable for the preparation, approval and tax settlement requires strict compliance with the following statutory deadlines:

• Preparation of annual accounts: The company’s board of directors must prepare the accounts within three months of the end of the financial year.
• Corporate approval: The General Meeting must approve these annual accounts within six months of the closing date.
• CIT settlement and payment: The tax liability must be paid within a strict period of 25 calendar days, once the sixth month from the accrual date has elapsed.

Before incorporating or acquiring a company in Spain, all foreign shareholders and future non-resident directors must obtain a Foreigner Identification Number (NIE) or a Tax Identification Number (NIF), depending on their legal status. At Seegman, we streamline the corporate entry of foreign investors by coordinating all these registration procedures with the Tax Agency in advance. Once the personal NIF/NIE numbers have been obtained, the company itself (whether a new company or a shelf company) must be registered with the tax authorities in order to operate lawfully.

The process of obtaining tax identification and registration prior to the formalisation of the company involves the following steps:

• Corporate Investors: Obtaining a tax identification number (NIF) in Spain for the foreign parent company or any legal entity acquiring shareholder status.
• Individual Investors and Directors: Obtaining the NIE for any foreign individual involved in the share capital or the board of directors.
• Company Registration: Submission of the relevant tax forms to the Tax Authorities to register the company and obtain its provisional tax identification number (NIF), which will become definitive once it has been entered in the Commercial Register.
• Beneficial Ownership Declaration (KYC/AML): Notarial obligation to disclose the identity of the ultimate beneficial owners (those holding more than 25% of the capital or exercising control) to comply with anti-money laundering regulations.

The accrual of Personal Income Tax (IRPF) for tax residents in Spain formally occurs on 31 December of each year. The personal income tax period strictly coincides with the calendar year, meaning that the primary tax liability is indisputably determined on the closing date of the year. This unalterable temporal rule determines the taxpayer’s financial and family circumstances for the purposes of calculating their taxable income.

The accrual milestone establishes the application of the following personal taxation parameters:

• Tax Year: Covers the period from 1 January to 31 December of the relevant calendar year.
• Arising of the Liability: The tax liability accrues and becomes materially enforceable on 31 December.
• Taxation of Worldwide Income: Upon accrual, taxpayers classified as tax residents are required to pay tax on their total worldwide income earned during that year, regardless of its country of origin.

Spanish residents, whether individuals or corporate entities, have a mandatory obligation to report to the Bank of Spain any financial transactions carried out with non-residents, as well as the balances of assets and liabilities located outside Spain. Spanish exchange control regulations impose exhaustive monitoring of the international debtor and creditor positions of the business sector.

The frequency of this regulatory reporting to the Bank of Spain varies according to the following thresholds and volume parameters:

• Transaction Volume Threshold: The aggregate volume of transactions carried out by the resident during the previous financial year.
• Accounting Position Criterion: The balance of assets and liabilities held as at 31 December of the preceding year.
• Frequency of Submission: Depending on compliance with the above criteria, the resident must submit the information forms on a monthly, quarterly or annual basis.