Spain

The Spanish corporate income tax (CIT) regime establishes a general rate applicable to most corporate taxpayers, alongside a number of reduced and specific rates for particular categories of entities, a minimum effective tax rule, and distinct regional regimes in the Basque Country and Navarre. Each is outlined below.

General rate

The standard CIT rate in Spain is 25%, governed by the Corporate Income Tax Law (Ley 27/2014, de 27 de noviembre, del Impuesto sobre Sociedades; “Spanish CIT Act”).

Reduced and specific rates

The following specific rates are currently in force:

• 23%. Entities whose net turnover in the immediately preceding tax period was less than EUR 1 million (introduced with effect from 2023).
• 15%. Newly created entities for the first tax period in which their taxable base is positive and the immediately following tax period, provided the entity was not formed as part of a restructuring or spin-off of pre-existing activities.
• 30%. Credit institutions and entities engaged in the exploration, research and exploitation of hydrocarbons (the latter rate is also applicable in determining the minimum tax base, as discussed below).
• 20%. Tax-protected cooperatives (on the general taxable base; 25% on results not eligible for protection).
• 1%. Collective investment institutions (investment funds and sociedades de inversión de capital variable d’investissement à capital variable (SICAVs)) that meet applicable requirements.
• 0%. Real Estate Investment Trusts (Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario, or SOCIMIs). SOCIMIs are subject to a special 19% charge on dividends they distribute to shareholders that: (i) hold 5% or more of the SOCIMI's share capital; and (ii) either benefit from an exemption on that dividend income or are taxed on it at a rate below 10% in their home jurisdiction.

Minimum effective tax

Spain has introduced a minimum effective corporate income tax (CIT) rate rule, applicable to tax periods beginning on or after 1 January 2022. Under this rule, an entity's net tax liability—calculated after applying deductions and allowances, but before applying certain tax credits—may not fall below the following floors:

• 15% of the adjusted taxable base, for entities subject to the general 25% CIT rate.
• 18% of the adjusted taxable base, for credit institutions and hydrocarbon companies subject to the 30% CIT rate.
• 10% of the adjusted taxable base, for newly created entities subject to the 15% CIT rate.

Regional rates — Basque Country and Navarre

Spain’s common-territory CIT regime does not apply in the Territorios Forales (the Basque Country provinces of Álava, Guipúzcoa and Vizcaya, and the Foral Community of Navarre). These territories have legislative competence to regulate their own CIT:

• Basque Country. General CIT rate is 24% (with specific reductions available for SMEs and certain activities).
• Navarre. General CIT rate is 25% (aligned with common-territory rules, though the detailed regulations differ in several respects).

Yes. Spain transposed the EU Minimum Tax Directive (Council Directive (EU) 2022/2523, implementing the OECD Pillar Two Global Anti-Base Erosion (GloBE) rules) through Law 7/2024, of 20 December 2024, which established the Impuesto Complementario (complementary tax).

An entity is tax resident in Spain if it meets any of the following conditions:

• Incorporated under Spanish law.
• Registered office located in Spain.
• Place of effective management located in Spain.

Resident entities

Taxable income. Resident entities are subject to CIT on their worldwide income.

The taxable base is generally calculated starting from the accounting profit or loss, subject to specific adjustments prescribed by the Spanish CIT Act (e.g. permanent differences, timing differences, specific allowances and limitations).

Participation exemption (dividends and capital gains from qualifying shareholdings). Capital gains are included in the general taxable base and taxed at the ordinary CIT rate (25%). However, the Spanish CIT Act provides 95% exemption (effectively 5% remains taxable, resulting in a maximum 1.25% effective CIT cost at the 25% rate) on dividends received and capital gains arising from the transfer of qualifying shareholdings, provided the following conditions are met:

• The holding represents at least 5% of the share capital or voting rights of the subsidiary.
• The shareholding has been held, directly or indirectly, for a continuous period of at least one year (before or after the dividend or transfer).
• For domestic shareholdings, the subsidiary must be subject to Spanish CIT (or an equivalent tax if a subsidiary in the Basque Country or Navarre).
• For foreign shareholdings, the subsidiary must be subject to a nominal tax of at least 10% in its country of residence (provided it has been subject to an effective rate of at least 10%). This requirement is deemed satisfied where the subsidiary is resident in a country with which Spain has entered into a double tax treaty that is applicable to it and that contains an exchange of information clause. Investment vehicles and tax-haven entities are excluded from this treatment.

Practical note: the reduction from 100% to 95% exemption (introduced in 2021) is subject to significant litigation and legislative debate. The 5% non-exempt portion is intended to represent a proxy for the costs related to managing the shareholding.

Switch-over clause. Where the subsidiary is resident in a jurisdiction with which Spain does not have a double tax treaty (DTT) or exchange of information agreement, or if the conditions for the participation exemption are not met, a tax credit for foreign taxes paid is available as an alternative mechanism to avoid double taxation.

Foreign branch income. Income attributable to a permanent establishment (PE) of a Spanish resident entity abroad may benefit from an exemption (rather than a credit) under Article 22 of the Spanish CIT Act, subject to equivalent conditions (the PE must be located in a jurisdiction with a CIT analogue of at least 10%). Losses from exempt foreign PEs are not deductible.

Non-resident entities — non-resident income tax

Non-resident entities are subject to non-resident income tax (NRIT) (Impuesto sobre la Renta de No Residentes (IRNR)), governed by Ley del Impuesto sobre la Renta de No Residentes (Royal Legislative Decree 5/2004):

• Non-residents without a PE in Spain are taxed only on Spanish-source income, generally by way of withholding at source (see Question 1.5, below).
• Non-residents operating through a PE in Spain are taxed on the income attributable to the PE at 25% (the same rate as CIT for residents), under rules broadly analogous to the CIT regime.

Withholding taxes on Spanish-source payments to non-residents are addressed in Question 1.5, below.

Spain levies several indirect taxes, the most significant of which are value added tax, transfer tax and stamp duty, and a number of sector-specific levies.

Value added tax (VAT/IVA)

Spain applies VAT under Ley 37/1992, de 28 de diciembre, del Impuesto sobre el Valor Añadido, which transposes the EU VAT Directive (2006/112/EC). The rates applicable in mainland Spain and the Balearic Islands are:

• 21%. Standard rate.
• 10%. Reduced rate (e.g. food in general, passenger transport, hospitality services, cultural events).
• 4%. Super-reduced rate (e.g. bread, milk, books, newspapers, medicines, products for persons with disabilities).
• 0%. Zero rate applicable on a temporary basis to certain essential food items introduced in recent years.

Note: the Canary Islands are outside the EU VAT area and apply their own equivalent tax, the Impuesto General Indirecto Canario (IGIC), at a general rate of 7%. Ceuta and Melilla apply the Impuesto sobre la Producción, los Servicios y la Importación (IPSI).

Transfer tax and stamp duty

Transfer tax and stamp duty (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados (ITP/AJD)) is a regional tax comprising three modalities:

• Transfer tax. Applies to transfers of second-hand real estate and other assets between non-VAT-taxable persons. Rates generally range from 6% to 10%, depending on the region.
• Corporate transactions. Applicable to capital reductions and dissolution of companies (1%), among other operations. Capital contributions are generally exempt.
• Stamp duty. Applies to notarial documents involving registrable acts (e.g. mortgage deeds). Rates typically range from 0.5% to 1.5% depending on the region.

Other indirect and specific taxes

• Financial transaction tax (FTT). 2% tax on the acquisition of shares in Spanish listed companies with a market capitalisation exceeding EUR 1 billion, introduced by Law 5/2020.
• Digital services tax (DST). (Impuesto sobre Determinados Servicios Digitales) 3% on revenues derived from online advertising services, online intermediation services and sale of digital data, applying to entities with global revenues exceeding EUR 750 million and Spanish revenues exceeding EUR 3 million, introduced by Law 4/2020.
• Excise duties. On alcohol, tobacco products and hydrocarbons, in line with EU harmonised frameworks.
• Energy and environmental taxes. Including the electricity tax and various environmental levies.

Spanish tax law imposes withholding obligations on both domestic and cross-border payments. The applicable rates depend on the nature of the income, the tax residence of the recipient, and the availability of treaty or EU Directive relief. The key rules are set out below.

Domestic withholding — payments to residents

Under the CIT Act and the Personal Income Tax Law (Ley 35/2006 (LIRPF)), withholding is required on the following types of income paid to Spanish tax residents:

• Dividends and profit distributions: 19%.
• Interest and financial returns: 19%.
• Royalties: 19%.
• Lease of urban property: 19%.

Withholding taxes on payments to non-residents (NRIT)

Withholding taxes under the NRIT regime apply at source. The domestic rates are as follows, subject to reduction under an applicable DTT or EU Directive:

Key points on application:

• Parent-Subsidiary Directive (Directive 2011/96/EU, transposed into Spanish law). Dividends paid by a Spanish subsidiary to an EU parent holding at least 5% for a continuous period of at least one year are exempt from Spanish withholding tax, subject to anti-abuse conditions.
• Interest and Royalties Directive (Directive 2003/49/EC, transposed into Spanish law). Interest and royalties paid between associated companies (25% minimum holding) resident in EU Member States are exempt, subject to conditions and anti-abuse rules.
• Treaty network. Spain has concluded over 100 DTTs. Treaties typically reduce dividend withholding to 5% or 15%, interest to 0–10% and royalties to 0–10%, depending on the treaty and the nature of the payment.
• Beneficial ownership. Spain applies the beneficial owner requirement as a condition for treaty or directive relief. Anti-treaty shopping provisions apply, and the Spanish tax authorities (State Tax Agency (STA) (Agencia Estatal de Administración Tributaria (AEAT))) scrutinise conduit arrangements.
• Procedure for relief. Non-residents may claim reduced rates or exemptions either at source (by providing the appropriate certificate of tax residence and, where relevant, a certificate of beneficial ownership) or by way of refund claim within four years.

Spain has several anti-avoidance mechanisms, both general and specific, contained principally in the Ley General Tributaria (Law 58/2003; “General Tax Law”) and the CIT Act.

General Anti-Avoidance Rule (GAAR) — “conflict in the application of a tax rule”

The primary GAAR is found in Article 15 of the General Tax Law (conflicto en la aplicación de la norma tributaria), which replaced the former abuse of law (fraude de ley). It applies when:

• the taxpayer has carried out acts or transactions that are notoriously artificial or improper for achieving the economic result obtained; and
• such acts or transactions produce a tax advantage that would not have arisen under the acts or transactions that would have been natural or appropriate for the economic result.

Where Article 15 applies, the tax authorities determine the tax liability as it would have arisen had the taxpayer used the ordinary or appropriate transactions, and the tax advantage is disregarded.

Simulation

Article 16 of the General Tax Law addresses simulación (simulation), which arises where the legal characterisation of an act or contract does not reflect its true economic substance (e.g. a loan that is in reality an equity contribution). In cases of simulation, the tax consequences are determined by reference to the true underlying act or transaction. Unlike the GAAR, simulation cases can carry penalties.

Specific anti-avoidance rules (SAARs)

In addition to the general provisions, Spanish tax law contains a comprehensive body of SAARs, including:

• Controlled foreign company (CFC) rules. (Articles 100–101, Spanish CIT Act) Imputation of passive income of low-taxed foreign subsidiaries.
• Interest limitation rule. (Article 16, Spanish CIT Act) Net financial expenses are only deductible up to 30% of EBITDA (earnings before interest, taxes, depreciation, and amortisation), with a de minimis threshold of EUR 1 million per year. Carryforward provisions apply.
• Hybrid mismatch rules. (Article 15 bis, Spanish CIT Act) Transposing the EU Anti-Tax Avoidance Directive (ATAD 2, Council Directive (EU) 2017/952).
• Exit tax. (Article 19.1, Spanish CIT Act) Taxation of unrealised gains on assets when Spain loses taxing rights.
• Transfer pricing rules. (Article 18, Spanish CIT Act) Arm’s-length principle, documentation requirements and specific adjustments.
• Anti-treaty shopping. Provisions applicable under both domestic law and DTTs.

Based on STA audit activity and recent case law from the Tribunal Supremo (Supreme Court) and the Audiencia Nacional (National High Court), the most frequently disputed issues are:

Corporate income tax

• Transfer pricing. Valuation of intragroup transactions (services, royalties, financing, business restructurings) remains the single most contentious area. The STA’s Transfer Pricing Inspection Department (Oficina Nacional de Fiscalidad Internacional (ONFI)) has significantly increased its activity.
• Participation exemption. Disputes over whether the subject-to-tax condition (minimum 10% effective rate) is met by foreign subsidiaries; characterisation of the underlying income.
• Interest deduction limitations. Application of the 30% EBITDA rule, particularly to leveraged buy-out structures and intragroup financing.
• Restructuring and mergers and acquisitions (M&A). Tax neutrality regime (régimen especial de reestructuraciones) — denial of tax neutrality where the principal purpose of a transaction is tax avoidance; goodwill amortisation disputes.
• Application of GAAR and SAARs. Business purpose and economic substance challenges to holding company structures, hybrid instruments and aggressive tax planning schemes.
• Permanent establishment. Disputes as to whether foreign groups have a PE in Spain (increasingly relevant for digital business models).
• CFC rules. Imputation of passive income from low-taxed foreign subsidiaries.

Withholding taxes and non-resident taxation

• Beneficial ownership. Treaty relief denied on dividends, interest and royalties paid to non-resident entities that the STA characterises as conduit companies.
• Dividend withholding. Denial of Parent-Subsidiary Directive exemption on anti-abuse grounds.
• Interest withholding. Denial of Interest & Royalties Directive exemption on interest paid to non-resident entities that the STA characterises as conduit companies.
• Real property gains. Taxation of indirect transfers of Spanish real estate-rich companies.

Indirect taxes

• VAT deductibility. Input VAT recovery disputes, particularly in holding company and partially exempt structures; disputes regarding VAT exemptions on real estate and financial transactions.
• Transfer tax on real estate. Classification of transactions as VAT-subject or transfer-tax-subject; valuation of real property.

Other recurring disputes

• Tax residence and management and control. Corporate tax residence disputes in cross-border group structures.
• Digital economy. Application of the DST and FTT.

The resolution of tax controversies in Spain is governed by a comprehensive legislative framework comprising the General Tax Law and its implementing regulations, the rules on administrative review, and the law on administrative courts.

Primary legislation

Tax procedures in Spain are governed principally by:

• Law 58/2003, of 17 December, General Tax Law. The foundational statute setting out the rights and obligations of taxpayers and the powers of the tax authorities, as well as the procedural framework for assessments, penalties, administrative review and the statute of limitations.
• Royal Decree 1065/2007. (Reglamento General de Gestión e Inspección) Implementing regulation on tax management and inspection procedures.
• Royal Decree 939/2005. (Reglamento General de Recaudación) Tax collection procedure.
• Royal Decree 520/2005. (Reglamento General en Materia de Revisión en Vía Administrativa) Administrative review procedure.
• Law 29/1998, of 13 July, on Administrative Courts. (Ley Reguladora de la Jurisdicción Contencioso-Administrativa) Governs judicial review of administrative acts, including tax decisions.

Competent tax authorities

• State Tax Agency (AEAT). Administers CIT, NRIT, VAT and most state taxes for entities not within the Territorios Forales.
• Foral tax agencies. The Basque Country (Haciendas Forales of Álava, Guipúzcoa and Vizcaya) and Navarre have their own tax administrations.
• Regional tax authorities. Administer devolved taxes (ITP/AJD, inheritance and gift tax).

Procedural stages

The tax controversy process follows the stages below:

• Tax audit/inspection.
  • The STA opens a tax audit covering one or more tax periods and taxes.
  • The process culminates in a proposal — agreed (with a 30% penalty reduction) or disagreed.
  • A formal assessment is then issued.
  • Penalties are assessed in separate parallel proceedings.
• Voluntary administrative appeal.
  • Optional; filed with the same authority that issued the assessment within one month.
  • Rarely effective in practice; used mainly to preserve rights or obtain suspension.
• Economic-administrative claim.
  • Mandatory prior to judicial review.
  • First-instance claims are heard by the Tribunales Económico-Administrativos Regionales (TEARs) at regional level or, for certain cases (large taxpayers, transfer pricing, directives), by the Tribunal Económico-Administrativo Central (TEAC) in Madrid.
  • The TEAC’s doctrine is binding on the STA and the TEARs.
  • An appeal against a TEAR decision may be brought to the TEAC or directly challenged in the courts.
• Judicial review.
  • TEAC decisions. Appealed to the Audiencia Nacional (National High Court).
  • TEAR decisions. Appealed to the relevant Tribunal Superior de Justicia (High Court of Justice of the autonomous community).
  • Cassation appeal. Lies with the Supreme Court for questions of objective interest to the formation of case law. The Supreme Court’s doctrine is binding on lower courts and the TEAC.
  • EU law issues. References to the Court of Justice of the European Union (CJEU) are available.
  • Constitutional challenges. The Tribunal Constitucional has jurisdiction over constitutional infringements (e.g. violations of the principle of economic capacity or non-confiscatory taxation).

Statute of limitations. The general limitation period for the right of the STA to assess taxes is four years from the end of the voluntary filing period, extendable where criminal tax fraud proceedings are initiated.

Spain does not have a general system of domestic mediation or arbitration in tax matters. However, the following mechanisms are available:

Advance tax rulings

• Taxpayers may request a binding ruling from the General Directorate of Taxes (Dirección General de Tributos) on the tax treatment of transactions before they are carried out.
• The ruling is binding on the STA (but not on the courts) with respect to the specific taxpayer and facts described.
• This is the principal tool for achieving upfront legal certainty and preventing future disputes.

Advance pricing agreements (APAs)

• Available for transfer pricing matters under Article 18.9 of the Spanish CIT Act.
• Can be unilateral (binding on the STA), bilateral or multilateral (negotiated with the competent authorities of one or more treaty partners).
• Effective for a maximum of four years, with the possibility of rollback to open years in certain circumstances.
• Bilateral and multilateral APAs are conducted under the Mutual Agreement Procedure (MAP) channel.

MAP

• Available under Spain’s DTT network and the EU Arbitration Convention.
• The EU Tax Dispute Resolution Directive (Council Directive 2017/1852/EU), transposed into Spanish law through Law 13/2023, of 24 May 2023, establishes a framework for resolving disputes regarding the interpretation and application of treaties between EU Member States. The Directive provides for a mandatory arbitration phase if the competent authorities fail to reach agreement within two years (extendable by one year).
• MAP requests are submitted to the AEAT’s International Tax Department and do not require suspension of domestic proceedings (though parallel domestic litigation should be managed carefully to avoid prejudicing the MAP).

Pending reform

There has been ongoing policy discussion in Spain about introducing broader ADR mechanisms for tax disputes (particularly a form of mediation at the economic-administrative level), but no such reform has been enacted as of the date of this guide.