Commercial and Tax Law: A Comprehensive Guide for Businesses
COMMERCIAL LAW
Commercial law regulates a company’s economic activity. It is a collection of laws relating to business, covering various issues such as:
- Entrepreneurship
- Business legal entities
- Accounting
The commercial code doesn’t encompass all commercial law, as special laws also exist.
Business Obligations and Rights
The primary objective of a company is to generate profits. However, they must engage in legal activities to achieve this. Entrepreneurs have a social responsibility and must adhere to laws such as:
Spanish Accounting Law
Contained in the commercial code and corporation law, this law mandates recording every economic transaction. Companies must fulfill requirements like registering financial movements chronologically.
Competition and Advertising
These laws ensure fair competition and prevent unfair practices.
Competition Law
This law penalizes actions that disrupt free competition.
Advertising General Law
This law ensures advertising activities are conducted faithfully.
Industrial Property and Consumer Defense
These laws protect new creations. Two types of industrial properties exist: inventions and distinctive emblems. Patents safeguard products or services for a specific period. Consumers receive support and protection through consumer and users’ protection laws.
Commercial Registry
This public entity publishes companies’ legal statutes as required by law. Its goals include:
- Registering companies upon establishment
- Legalizing company books
TAX LAW
Tax law generates funds for government expenses.
Tributes and Types
Tributes are the primary income source for governments, financing public expenditure and controlling economic activity. They are classified into three groups:
- Fees: Payments for public services or direct benefits.
- Contributions: Taxes collected by public institutions.
- Taxes: Payments made by individuals without receiving direct benefits.
Taxes and Types
Taxes are applied to income and wealth:
Wealth Tax
Paid by individuals possessing assets exceeding a specific threshold.
Personal Income Tax
This direct tax considers the taxpayer as the passive subject. As an individual’s income increases, so does their tax liability, making it a progressive tax. Income sources include dependent work and self-employment. Taxable income is calculated by subtracting expenses from income. It encompasses:
- Benefits from working
- Fixed capital
- Circular capital
- Economic activity
- Profits and losses
Company Tax or Corporate Income Tax
Companies pay taxes on their profits. This proportional tax requires companies to pay the same percentage, but not necessarily the same amount. The percentage varies from 24% to 28% based on company size. Micro-businesses benefit from a reduced rate of 15%, while cooperatives pay 20%. The payer is a legal entity, such as a company or society. As a direct tax, if there are no profits, no tax is due.
Tax on Business Activity
This local (town hall or provincial government) direct tax is levied annually on business performance. The passive subject files a declaration upon commencing business activity.
VAT (Value Added Tax)
This general consumption tax is collected incrementally at each production stage. The current general rate is 21%, applied to most goods and services. Reduced rates of 10% or 4% apply to specific products and services. Some products, like alcohol and tobacco, have higher special taxes. Conversely, services like healthcare, education, and insurance contracts are exempt from VAT. Companies pay VAT on purchased products and services and may pass it on to customers. Therefore, the end consumer ultimately bears the VAT burden. The tax base is calculated as follows: product selling price + commissions + packing + transport + other services.
Types of Taxes
We can distinguish three types of taxes:
- Progressive Tax: The tax rate increases as the tax base rises.
- Proportional Tax: These taxes have a fixed tax rate regardless of the tax base, resulting in a proportional tax payment (e.g., VAT).
- Regressive Tax: The tax rate increases as the tax base decreases.