Market overview

The political situation in Spain is ambiguous at best after two general elections failed to return a majority government, meaning the legislative environment for taxpayers is uncertain. It is possible that the next majority government could reverse the fiscal reforms, which have included tax measures, which have taken place since the financial crisis. Without a clear political direction, taxpayers cannot plan for all tax and transfer pricing risks.

The implementation of the BEPS Action Points into domestic law has, for the most part, already taken place, with Spain being a rapid adopter of both the OECD guidelines and the EU Anti-Tax Avoidance Directive which was implemented in Spain before it cleared the European parliament.

Spain was also one of the first countries in the world to implement country-by-country reporting (CbCR) requirements, which came into effect from January 1 2016.

New rules on TP documentation were agreed in July 2015 and have been in effect since January 1 2016, requiring multinationals to prepare a master file for submission to the Spanish tax authorities. This file will have to detail the group's organisational structure, a description of its business activities, its intangibles, its financial activities and its financial and tax positions.

Given that Spain is ahead of other jurisdictions on BEPS implementation, it has been necessary for the tax authorities in the jurisdiction to discuss with taxpayers their thinking on certain issues, something which they have been happy to do according to Rafael Fuster, head of tax at Uría Menéndez.

"There are a lot of tax officials making themselves available to explain the ideas and how they see things – making themselves available for discussion," said Fuster. He further noted that the Spanish tax authorities "want to be on the front line of the developments of BEPS, so far as implementation is concerned".

Tax authorities

Taxation Agency
Paseo de la Castellana, 106, Madrid 28046
Tel: +34 915 908 000
Fax: +34 91 568 08 80

Tax rates at a glance

(As of July 2016)

Corporate income tax 25% (a)
Capital gains 0% to 19% (b)
Branch tax 25% (c)
Withholding tax (d)
Dividends 0% to 19% (e)
Interest 0% to 19%
Royalties from patents and licences 0% to 24%
Branch remittance tax 0% to 19%
Net operating losses (years)
Carryback Not permitted
Carryforward Without time limit (f)

  1. Under Corporate Income Tax ("CIT") Law, the general CIT rate is 25% for 2016 onwards.
  2. Under non-resident income tax law, capital gains (obtained not through a PE) are taxed up to 19% for 2016 onwards. An exemption regime is granted subject to the fulfilment of certain requirements.
  3. A general branch tax rate is applicable to non-residents with a permanent establishment (PE) in Spain. Permanent establishments are taxed at the same rate as domestic companies commented in letter (a) are.
    In addition, a 19% branch profit tax is imposed on after-tax profits remitted to a foreign head office. The branch profit tax does not apply to branches of EU entities or entities resident in a country that has signed a tax treaty to avoid double taxation with Spain which does not expressly provide otherwise.
  4. The higher rate applies unless it is reduced under a tax treaty or exempt under the EU Directives for interest, dividends and royalties.
    The general tax rate for non-residents (obtaining income not through a PE) is 24% in 2016 onwards. This general tax rate is not applicable to dividends, interests or capital gains, but to other income. In the case of companies resident in EU country, the general tax rate is 19% for 2016 onwards.
  5. Dividends distributions to residents of other EU member states benefit from an exemption if the foreign parent company has continuously held a minimum of 5% of the share capital of the Spanish company for one year before the dividends are declared or the acquisition cost of the holding in the company was higher than €20 million. Certain anti-abuse measures may apply.
  6. Tax Authorities are allowed to review tax loss carryforwards within 10 years from the end of the filing period for the tax return in which those tax losses were generated.

Source: Garrigues

Firm contact details

ARCO Abogados y Asesores Tributarios