TAXES IN SPAIN

I.1 VAT TAX

Monthly or in its case, quaterly processing of customer’s and supplier’s invoices, plus bank reports, in order to respect the Vat payment/return maturity within the 20th of April, July and October, and within the 30th on January, must take place generally between the 3rd and the 15th of each month, therefore our service needs the copies of these invoices to process within the 3/5th of each month for the previous competence month (or copies of the correspondent excel files or results).

If the company or branch’s turnover exceeds 8.000.000 €, the VAT monthly return is compulsory, and should be filed before the 20th of each month; under that limit the Vat return should be processed on quarterly base (between the 1st and 20th of April, July and October, and between the 1st and 30th on January.

Annual summary VAT tax return (390 form) should be file before January 30.

VAT refund

In case of Vat annual credit, the reimbursement can be exclusively asked in the VAT tax return corresponding to the fourth quarter of the year, for the previous competence year. Such refund is normally subject to a previous inspection and the effective refund takes around 6 months.

In case of Representative offices, a refund of the VAT borne during a calendar year can be requested from the Spanish Tax Authorities in January of the following year. However, entities not acting in Spain through a permanent establishment (i.e. representative offices) are not granted VAT refunds when a lack of reciprocity between Spain and the foreign country.

I.2 CORPORATE INCOME TAX

General Tax rates

YEAR Tax rate

2007 32,5%

2008 30%

Tax rates. Small sized companies

For tax purposes, companies with an annual turnover less than 8.000.000 euros are considered as small size.

The applicable tax rate will vary in the same way and amount as the general tax rate, as follows:

YEAR Tax rate.

Taxable base until 120.202,41 euros Tax rate

Rest Taxable base

2007 25% 30%

CIT. Tax losses

According to the Spanish Corporate Income Tax (CIT) Law, the company’s negative taxable base can offset future benefits within a 15 year period.

Once the company has incurred in benefits, the amount of negative taxable bases which could be compensated will be freely choose by the company.

Nevertheless, and in order to avoid possible extensions of the commented 15 year period, such compensation cannot exceed the positive income obtained by the company during the tax year.

Payments on account of CIT

Payments on account of CIT should be made within the first 20 days of October, December and April of each year. As a general rule, such amount corresponds with 18% of the tax debt (minus certain deductions) declared in the last CIT tax return.

1.3 PIT

Withholdings on account of PIT should be filed on quaterly basis within the 20th of April, July, October and January (or within the first 20 days of each month if the company’s turnover exceeds Euros 6.000.000).

Annual summary withholding and payment on account of Personal Income Tax (190 form) should be file before January 20 of each year.

1.4 BUSINESS ACTIVITIES TAX

It must only be paid by companies with a turnover exceeding 1.000.000 euros.

1.5 OTHER TAXES AND MOST COMMON TAX RETURNS

• Small tax contributions are also forecasted for annual registration fee by the Chamber of Commerce on annual basis.

• Quaterly intra EU operations tax returns (349 form) should be filed within the 20th of April, July, October and January (or within the first 20 days of each month if the company’s turnover exceeds Euros 6.000.000).

• Quaterly withholdings on account of Urban rentals tax returns (115 forms) should be filed within the 20th of April, July, October and January (or within the first 20 days of each month if the company’s turnover exceeds Euros 6.000.000).

• Annual summary withholdings on account of Urban rentals tax returns (180 form) should be file before January 20.

• Annual summary form on business operations carried out with third parties (347 form) should be file within the month of March.

Corporate income tax:

Tax advice on preparation of corporate income tax return. Optimisation of tax credits. Special tax regimes. Year end issues.

 

 

Tax consolidation:

Group of companies. Implementation of the tax consolidation regime. Preparation of consolidated returns.

 

 

Mergers and acquisitions:

Tax advice on mergers and acquisitions. Planning of corporate restructuring operations (purchases, mergers, acquisitions, contributions of lines of business). Application of the special tax regime.

 

 

Tax audit:

Analysis of tax risks and identification of contingencies in company's acquisitions. Tax accrual.

 

 

Personal income tax:

Personal tax planning for individuals. Advice on withholdings and benefits in kind for companies.

 

 

Major fortunes and family businesses:

Planning family assets. Minimisation of tax on dividends distributed.

 

 

Heritance Tax:

Tax Planning. Exemptions and bonifications.

 

 

VAT, customs and excise duties:

Advisory services for companies engaged in international trade. Imports and exports. Tax warehouses. Intra-Community operations. Special schemes for non-established companies. VAT refunds. Excise duties on manufactured goods. Customs inspections.

 

 

Transfer Tax (ITP and AJD):

Real estate operations. Waiver of exemption from VAT. Stamp duty taxation.

 

 

Transfer pricing:

Design and implementation of transfer prices for multinational companies. Relations with the tax authorities.

 

 

Formal tax procedures:

Tax inspections. Appeals and claims against administrative decisions of the tax authorities. Sanction proceeding.

 

 

Taxation in Autonomous Regions and Municipalities:

Property tax. Regional and municipal taxes and charges. Other taxes.

 

 

Canary Island tax regime:

ZEC zone. Tax deductions and investment incentives.

 

 

Foundations and not-for-profit entities:

Tax incentives. Special corporate income tax regime. VAT pro rate. General Relations with the tax authorities.