Tax law in Spain is similar to German tax law in some respects. For example, in Spanish tax law there is also an unlimited tax liability “Impuesto sobre la Renta de las Personas Físicas” for residents of Spain, as well as a limited tax liability, the “Impuesto sobre la Renta de No Residentes”, for persons who live abroad but receive income from Spain. Despite this similarity to German tax law, there are some deviations, which we address in this article.

Spanish tax law follows many principles in principle, which we also know from our German tax law. For example, the residency principle and the world income principle are also important to Spanish tax law. It is therefore hardly surprising that many fundamental issues of a fiscal nature have been solved in the same way.

Spanish income tax law, like German income tax law, also begins with the question of personal tax liability. All persons living and residing in Spain (residency principle) fall under the so-called “Impuesto sobre la Renta de las Personas Físicas” (IRPF), the unlimited income tax liability. The world income principle also applies to you; anyone who falls under the unlimited tax liability has to tax all his profits and income in Spain.

In contrast, the “Impuesto sobre la Renta de No Residentes (IRNR)” stands, the limited income tax liability. Here, domestic profits or income of tax aliens are taxed. The underlying principle here is the territorial principle.

In addition, there is a double taxation agreement between Germany and Spain for purposes of double taxation.

In addition to these principles, the Spanish income tax is subjective and progressive in nature. Similar to German income tax law through special expenses, social security contributions or exceptional charges, also in Spanish income tax law certain personal costs can be deducted from the tax in order to show the most real picture of the performance of a taxpayer.

Companies can also be founded in Spain. The most famous forms are the “Sociedad anónima” (SA), which is similar to a German public limited company and the “Sociedad de responsabilidad limitada” (SRL), which comes close to a German GmbH. The most striking feature of these companies is the limited liability of the partners.

In addition, there are the "Sociedad comanditaria simples/por acciones", which is similar to a KG, and the "Sociedad en nombre colectivo", which is comparable to an OHG. The GbR also exists in a similar form in Spain, which is called “Sociedad civil”. Under company law, at least one natural person is involved as a full person.

In principle, all forms of company are subject to corporate tax law in Spain. Therefore, this also applies to the “Sociedad comanditaria simples/por acciones” (= KG) and the “Sociedad en nombre colectivo” (= OHG). Thus, Spain treats these forms of company differently from Germany, because in Germany these forms of company would tax their profits through the income tax of their shareholders (transparency principle).

At most, the GbR-like “Sociedad civil” is treated here as its German counterpart and thus taxed in Spain via the income tax of the shareholders.

Furthermore, in Spain the regular corporate tax rate is 35 %. For companies with a profit of up to EUR 120,000, the tax rate is reduced to 30%. However, in addition to the corporate tax rate, there is a withholding tax on interest, dividends, licenses and other profit-sharing of 18 %.

In addition, the withholding tax for profit distributions from companies resident in Spain to residents abroad increases to 25%.

Business premises maintained on Spanish soil are subject to additional business tax. Compared to Germany, however, this does not amount to 15 % of profit, but is significantly lower, since the corporate tax rate is already high. The collection of business tax in Spain is also the responsibility of the municipalities. Both the profit and the location of the company are decisive here, since these factors are included in the tax calculation.

For the Spanish inheritance or gift tax to apply, either the heir or giftee must be resident in Spain or the decedent or giftee must be resident in Spain. In these cases, there is an unlimited inheritance or gift tax liability. On the other hand, there is a limited inheritance or gift tax liability if neither heir nor giftee nor deceased or giftee are resident in Spain, but Spanish assets are present at the transfer. This would include, for example, land, businesses, company shares and other assets. In the case of unlimited inheritance or gift tax liability, on the other hand, worldwide assets – i.e. more than just Spanish assets – must be taken into account.

In addition to the previously mentioned taxes in Spain, there is also a Spanish version of the property tax and a Spanish version of the property transfer tax. Both taxes are basically quite similar to their German equivalents. However, the calculation and amount of the tax in Spain is completely different.

Spain has also implemented the VAT system directive based on EU law. This Directive harmonises all VAT legislation in the Member States.