Commercial & Tax Law: A Comprehensive Guide for Businesses
Commercial Law
Commercial law regulates a company’s economic activity. It encompasses a collection of laws governing business operations, covering various aspects such as:
- Entrepreneurship
- Business legal entities
- Accounting practices
While the commercial code provides a foundation, specific laws address particular areas within commercial law.
Business Obligations and Rights
A company’s primary objective is to generate profits through legal means. Entrepreneurs have a social responsibility to adhere to laws, including:
Spanish Accounting Law
Outlined in the commercial code and corporation law, this law mandates recording all economic transactions. Companies must fulfill requirements such as chronological registration of financial movements.
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 that advertising activities are conducted truthfully.
Industrial Property and Consumer Defense
This area of law safeguards new creations, encompassing two types of industrial properties: inventions and distinctive emblems. Patents protect products or services for a specific period. Consumers receive support and protection under consumer and users’ protection law.
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 revenue for the government to fund state expenses.
Tributes and Types
Tributes, the primary income source for governments, finance public expenditure and regulate economic activity. They are categorized 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 levied on income and wealth.
Wealth Tax
Individuals possessing assets exceeding a specific threshold pay this tax.
Personal Income Tax
This direct tax considers the taxpayer as the passive subject. As an individual’s income rises, so does their tax liability, making it a progressive tax. Income sources include dependent work and self-employment. Taxable income is calculated by deducting expenses from income. It comprises:
- 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, of money. The percentage varies from 24% to 28% based on company size, with a reduced rate of 15% for micro-businesses. Cooperatives have a 20% tax rate. The payer is a legal entity, such as a company or society. As a direct tax, no payment is due if there are no profits.
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)
VAT is a general consumption tax 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 or services and may pass it on to consumers through their selling prices. 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
There are three main 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.