Spain

Market overview

The Spanish economic recovery gathered impressive momentum in 2017.

GDP already exceeded pre-crisis levels and the IMF upgraded its growth forecast in July to 3.1% for 2017, up from 2.6% projected in a previous forecast.

Resilience has built up in the banking sector and the current account balance improved, building on a strong, export-oriented services sector. However, further adjustments in fiscal policy are needed to reduce debt, the IMF advised.

"We are stable and in the middle of a strong economic recovery," said José Ramón Vizcaino, head of tax at Dentons. "I don't think the Spanish government will make any big changes soon."

Multinationals trading across Spanish borders are most affected by compliance with the OECD's BEPS project. They demand TP planning advice from lawyers and accountants, enabling them to transform their business models to both comply with BEPS and improve their economic efficiency.

A new draft proposal was published in May concerning inter-party transactions and transactions involving lower tax jurisdictions.

If applied into law, taxpayers will be obliged to include information on inter-party transactions from their income tax return (Form 200) in the new Form 232.

It is still compulsory for taxpayers to report all controlled transactions with the same related party, irrespective of the value of the individual transactions, if the total exceeds €250,000 ($293,000). Taxpayers must still report individual dealings exceeding €100,000 with the same related party, applying the same valuation method with the arm's-length principle (ALP).

The first new rule proposes that taxpayers conducting the same type of transactions, with the same TP method, but below the above thresholds, should report these transactions if they account for at least half of the corporation's income.

The second rule states that taxpayers must account for 'specific transactions' if the value exceeds €100,000. These are currently excluded from the simplified content in the Spanish tax legislation.

The order is open to amendment at current as it is still in the drafting phase.

"Generally speaking, the ongoing trends in Spain are towards an increasing specialisation in tax matters, and firms not following this trend will gradually lose market share," said Alberto Estrelles, the managing partner of KPMG Abogados. "We have detected a particularly significant increase in the demand for multi-disciplinary global services that are coordinated locally. Moreover, the use of technological tools when rendering tax and transfer pricing services is becoming increasingly widespread."


Tax authorities

Taxation Agency
Paseo de la Castellana, 106, Madrid 28046
Tel: +34 915 908 000
Email: delegacioncentral@correo.aeat.es
Website: www.agenciatributaria.gob.es


Tax rates at a glance

(As of July 2017)

Corporate income tax (a) 25%
Capital gains (b) 0% to 19%
Branch tax (c) 25%
 
Withholding tax (d)
Dividends (e) 0% to 19%
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 (f) Without time limit

  1. Under Corporate Income Tax ("CIT") Law, the general CIT rate is 25%.
  2. Under Non-resident income tax Law, capital gains (obtained not through a PE) are taxed up to 19%. 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. This tax is not chargeable according to the provisions of most tax treaties. In addition, branch profit tax does not apply to (i) branches of EU entities (except tax havens) and to (ii) branches of entities resident in a country that has signed a tax treaty with Spain which does not expressly provide otherwise, provided that there is reciprocal treatment.
  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%. 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%.
  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. In general, 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
Deloitte
Garrigues, Taxand Spain
KPMG