Value-added tax (VAT)
Spanish VAT is payable on supplies of goods and services carried out in Spanish VAT territory and on imports/intra-EU acquisitions of goods and services. There are three rates for the different types of goods and services, which are as follows:
- Ordinary rate of 21%, applied on regular supplies of goods and services.
- Reduced rate of 10%, applied on basic necessities (e.g. food and agricultural products not included in the ‘super reduced’ 4% rate, dwellings, other qualifying services). Live cultural events and cinema tickets are taxed at the reduced rate of 10% too.
- Super reduced rate of 4%, applied on basic necessities other than those classified under the reduced rate (e.g. bread, milk, books, medicine).
In the Canary Islands, a specific tax is applied instead of VAT, called the Canary Island General Indirect Tax (IGIC). The ordinary IGIC rate is 7%, and the other IGIC rates are 0%, 3%, 9.5%, and 15% (20% for tobacco). IGIC is similar to VAT, with some significant differences, such as the tax exemption established for telecommunications services. Imports of tangible goods into the Canary Islands are subject to this tax.
In Ceuta and Melilla, sales tax is applied instead of VAT.
Many goods imported into Spain from outside the European Union are subject to customs duties. The rates are established by the EU’s Common Customs Tariff and vary widely.
Excise duties are chargeable on most hydrocarbon oil products, alcoholic drinks, and tobacco products imported into or produced in Spain. Some examples are: (i) most road fuels, approximately EUR 0.38 per litre; (ii) cigarettes, approximately EUR 24.7 per thousand plus 51% of the maximum retail price (with a minimum tax of EUR 131.5 per 1,000 cigarettes, which is increased to EUR 141 if the retail price is less than EUR 196 per 1,000 cigarettes); (iii) tobacco, approximately EUR 23.5 per kg plus 41.5% of the maximum retail price (with a minimum tax of EUR 98.75 per kg, which is increased to EUR 102.75 if the retail price is less than EUR 165 per kg); (iv) most wines, EUR 0 per litre; and (v) spirits, approximately EUR 9.59 per litre of pure alcohol included.
Tax on tax-haven-resident companies owning real estate in Spain
Companies resident in a tax haven for tax purposes that own real estate or hold real property rights in Spain are subject to a special levy accrued on 31 December and declared and paid in January of the following year in the place and manner established by law. The tax is 3% of the assessed value of the real estate.
A transfer tax, which is usually 5% to 11%, depending on the region, is generally levied on inter vivos transfers, including real estate transfers and real estate leases that are exempt from VAT.
Second and subsequent transfers of buildings are exempt from VAT; consequently, they are, in principle, subject to transfer tax.
Residential leases are exempt from VAT and therefore subject to transfer tax.
Transfers of listed or unlisted securities are, in principle, exempt from both transfer tax and VAT. This exemption does not apply for transfers of unlisted securities of a company on a secondary market that tries to evade the tax payable on a direct transfer of real estate that it owns. For this purpose, Spanish law establishes certain cases where it is understood that there is an intention to evade tax.
This exception does not apply to transfers of securities received as a result of the incorporation by banks of asset management companies and to transfers of securities of banks affected by the integration plans regulated by Law 9/2012, which will therefore be exempt from transfer tax. In addition, acquisitions of assets in the Canary Islands may be exempt from transfer tax (and from IGIC) when certain requirements are complied with.
Restructuring transactions are also exempt from transfer tax. For this purpose, mergers, spin-offs, exchanges of shares, and certain in-kind contributions are considered to be restructuring transactions.
Stamp duty is mostly levied on notarial instruments and records documenting transactions that have an economic value and need to be registered in public registries (e.g. company, land, and industrial property registries). Stamp duty is incompatible with transfer tax and capital duty, but compatible with VAT. The general rate is between 0.75% and 1.5%, depending on the region of Spain and the taxable event.
Stamp duty is also levied on certain commercial (e.g. bills of exchange, promissory notes), court, and administrative documents.
A 1% capital duty is levied on capital reductions and company dissolution and is payable by the shareholders.
Capital duty is incompatible with transfer tax and stamp duty in certain cases, but it is compatible with VAT.
Employers are required to withhold a percentage of their employees’ salaries and benefits as a payment on account of their personal income tax (PIT). The rate of withholding is a progressive rate of between 19% and 47%, depending on the employee’s personal circumstances and income.
Social security contributions
Employers are required to pay social security contributions. The rate of the contributions under the general social security contribution regime is the fixed rate of 29.9% plus a variable rate for occupational accidents (e.g. 1.5% for office work).
Employees are also required to pay social security contributions. Under the general social security contribution regime, the rate of social security contributions is 6.35%. Employers should deduct this amount from the amounts that they pay to employees.
The rates of social security contributions stated above should be applied on the employee’s total monthly gross employment income, whether in cash or in kind, with a minimum monthly contribution base of between EUR 1,050.00 and EUR 1,466.40, depending on the employee’s professional category, and a maximum monthly contribution base of EUR 4,070.10.
Both parts of the social security contributions (employer and employee) should be paid by the employer to the Social Security Treasury.
In addition to the taxes stated above, the following local taxes may be charged on companies:
- Real estate tax, levied annually by the local authorities on the ownership of real estate.
- Local tax levied on the increase in the value of urban land, chargeable when urban real estate is sold.
- Motor vehicle tax, charged on the ownership of vehicles.
- Tax on constructions, installations, and building works, charged on the cost of certain works that require town planning licences.
- Waste collection fees.