Understanding Taxes and Business Structures in Spain

Posted on Mar 14, 2025 in Law

Understanding Taxes

Taxes are figures created by law that require certain persons, depending on their ability to pay, to contribute to government revenue (General Tax).

Purpose:

  • They are a means to raise revenue.
  • They seek a better distribution of national income.

Basic Elements Involved in Tributes:

  • Taxable Event: This is the legal or economic budget, fixed by law to set each tax, and whose realization determines the obligation to contribute.
  • Taxable Person: The person who contributes to government revenue, which can be physical or legal.
  • Active Subject: The government agency that collects such income.

Elements of Taxable Income:

  • The alleged target, set by the law governing each tax, and whose realization determines the obligation to contribute to government revenue by the person required to declare and pay the tax.
  • Tax Base: The resulting amount to quantify financially the taxable event, usually expressed in money, in accordance with the rule governing the tax.
  • Taxable Income: The amount obtained by subtracting from the tax base amounts (reductions or bonuses) that each tax law allows.
  • Tax Rate or Tax Rate: A percentage applied to the taxable income (taxable if no deductions) in order to establish the tax rate.
  • Tax Fee: The result of applying the tax base or payable, as appropriate, the tax rate.
  • Tax Debt: The amount that must eventually be entered. It is obtained by adding to the tax charges legally enforceable, interest on arrears, surcharge pressure, and sanctions, by deducting tax and fee subsidies, deductions, or payments, in both cases if any.

Tax and Taxable Event:

  • Personal Income Tax: A direct, personal, and subjective tax levied on obtaining income by individuals as provided in the law governing it.
  • VAT: An indirect tax levied on consumption and is levied on the purchase of goods and services.
  • Corporation Tax: A direct and personal income tax on companies and other entities qualified as taxable by law. The taxable event is the source of income (profit) by the taxpayer (companies and institutions).
  • IAE (Economic Activities Tax): A direct tax in which the taxable event comprises the year-round exercise of business, professional, or artistic activities within the national territory.

The Corporation (Sociedad Anónima – SA)

  • Minimum Capital: €60,101.21, no maximum.
  • Capital Structure: Divided into shares.
  • Subscription: The constitution must be subscribed and paid up to 25%.
  • Shareholders: At least one shareholder (person or entity).
  • Liability: Limited to their capital contributions.
  • Accrediting Document of Society: Required.
  • Organs of Society: Required.
  • Constitution: Requires a public deed before a notary, including the bylaws.
  • Registration: Mandatory in the Mercantile Registry.
  • Company Name: The company name is free, adding the initials “SA”.
  • Modalities:
    • Simultaneous: In one act, the entire capital is subscribed.
    • Successive: A subscription period of capital is opened.

The Limited Company (Sociedad Limitada – SL)

  • Constitution: Requires a public deed before a notary, including the bylaws.
  • Registration: Mandatory in the Mercantile Registry.
  • The content is similar to SA.