The tax year for CIT purposes is the company’s accounting year. The tax year cannot exceed 12 months. Incorporation, change of accounting year, or dissolution of a company can give rise to a period of less than one year.
The tax system in Spain is a self-assessment system, and tax returns may be inspected by the tax authorities.
Annual CIT returns must be filed within 25 calendar days following the six months subsequent to the end of the tax year (i.e. if the tax year coincides with the calendar year, the return must be filed between 1 July and 25 July of the following calendar year).
Payment of tax
For CIT, three advance payments of the annual tax payment must be made during the first 20 calendar days of April, October, and December. The final CIT payment must be made with the annual CIT return.
For companies whose turnover, in accordance with Spanish VAT law, for the 12 months prior to the beginning of a tax period exceeds EUR 6,010,121.04, the advance payments are calculated by applying 17% to the taxable income (reduced by any applicable tax-loss carryforwards) for each advance-payment period, i.e. at 31 March, 30 September, and 30 November (percentage applicable to companies that are taxed at the general CIT rate).
Small and medium-sized companies can opt to calculate their advance payments in the same way as large companies (applying a percentage of 17%) or to apply a rate (currently 18%) on the tax liability of their last advance CIT return filed on 1 April, 1 October, or 1 December.
In addition, for companies whose net turnover for the 12 months prior to the beginning of a tax period exceeds the EUR 10 million threshold, a minimum advance payment is established, which is 23% of the profits reported in their income statement for each advance payment period, minus (solely) prior advance payments and certain particular types of income such as the income generated from arrangements with creditors. For credit institutions and companies of the hydrocarbon sector, the minimum advance payment on account is 25%. This minimum advance payment will not be applicable to certain types of entities taxed for CIT purposes at the 10%, 1%, or 0% rates, such as non-profit organisations, real estate investment companies, real estate investment funds, equity investment companies, financial investment funds, mortgage market regulation funds, pension funds, real estate investment trusts (REITs), or venture capital entities.
Variable capital investment companies, financial investment funds, real estate investment companies, real estate investment funds, mortgage market regulation funds, and pension funds that meet certain requirements and are taxed at a 1%, or even a 0%, tax rate should not make advance payments and are not required to file the corresponding tax return.
EUR 2,500 limit on cash payments
Payments in cash over EUR 2,500 are not allowed for transactions in which at least one of the parties is a person carrying on a business or professional activity, and fines of up to 25% of the amount of the transaction can be imposed on both the payer and the recipient of these cash payments.
The Spanish tax authorities have a tax inspection department that is responsible, amongst other things, for verifying that taxpayers’ obligations are correctly complied with and, if necessary, for making adjustments to their tax affairs by issuing one or more tax assessments.
As part of its responsibilities, the tax inspection department may investigate a taxpayer’s tax affairs to ensure that they are correct and verify the accuracy of filed tax returns.
Taxpayers’ tax returns to be examined by the tax inspection department are chosen on the basis of different criteria, such as: (i) by random sample, (ii) if debt push down restructuring transactions have been carried out that involve Spanish companies with material debt levels, (iii) if companies have recurring tax-loss carryforwards, or (iv) if companies are related to a family group and lack a production or commercial structure and where their personal and business assets are not clear.
If taxpayers disagree with a tax assessment issued by the tax inspection department as a result of a tax inspection, they may file an appeal firstly with the Spanish economic-administrative tribunal for tax appeals and then, if the appeal is not upheld by the tribunal, with the ordinary courts.
If taxpayers have paid incorrect amounts of tax to the tax authorities, they may claim a refund of any excess tax paid from the authorities within the statute of limitation period (four years) by means of a special procedure that commences with the filing of a request with the tax authorities.
Statute of limitations
The statute of limitations for taxes in Spain is generally (with some exceptions) four years starting from the day following the date of termination of the voluntary tax filing period.
This four-year period may re-start for a tax if the tax authorities carry out any actions or procedures, with the formal acknowledgement of the taxpayer, to acknowledge, adjust, review, inspect, guarantee, or collect all, or any part of, a tax obligation, or due to actions by the taxpayer, such as filing a new or late tax return, that alters or rectifies a previous tax return or filing of an appeal or claim regarding the tax.
The tax authorities' entitlement to verify or investigate tax-loss carryforwards, tax relief availed of for carrying out certain activities, and deductions for the avoidance of double taxation is time barred after ten years.
At the end of the ten-year period, proof of the origin and amount of tax-loss carryforwards must be given by presenting the relevant tax assessment/self-assessment and accounting records and providing evidence that such assessments and records were filed and deposited with the Companies Registry during this period.
Topics of focus for the tax authorities
Every year, the Spanish tax authorities issue general guidelines on the authorities’ annual tax and customs control plan. These guidelines identify areas where the tax authorities intend to adopt a greater role of verification, inspection, and monitoring during a certain tax year.
Obligation to disclose assets located overseas
Assets, such as accounts, shares, or real estate, that are located overseas must be disclosed. Severe fines are imposed (a minimum of EUR 10,000) for breaching this obligation.
In addition, assets regarding which the information disclosure obligation is not complied with by the established time limits are treated as unreported income for CIT payers and allocated to the earliest tax period of those that are not statute barred. Breaches of the obligation to declare this income are a very serious infringement, and fines of 150% of the gross tax liability are imposed.