SpainTax Obligations Detailed

As of today, February 5, 2025, employers in Spain face various tax obligations, including social security contributions, corporate income tax, and specific requirements for small and medium-sized enterprises. Understanding these obligations is crucial for compliance with Spanish tax law.

Employer Contributions

• Social Security: Employers contribute a substantial portion of employee earnings to social security, encompassing areas such as pensions, unemployment, and healthcare. The employer's social security contribution rate is approximately 30.48% of the employee's salary.
• Intergenerational Equity Mechanism (MEI): Included within the Social Security contributions, MEI is designed to bolster the long-term sustainability of the pension system. The exact rate for 2025 requires further confirmation.
• Unemployment: Employers contribute to the unemployment fund, ensuring coverage for employees in case of job loss. The rate for 2025 requires further confirmation.
• Salary Guarantee Fund (Fondo de Garantía Salarial - FOGASA): Employers contribute to FOGASA, which covers unpaid wages in cases of company insolvency. The rate for 2025 requires further confirmation.
• Professional Training: Employers contribute towards professional training programs. The contribution for 2025 requires confirmation.
• Work Accident Insurance: Employers are responsible for work accident insurance. Rates vary based on the specific industry and risk level and need confirmation for 2025.
• Solidarity Contribution: Applied to earnings exceeding the Social Security maximum base (€4,909.50 monthly in 2024, awaiting 2025 update), this contribution is tiered, with rates dependent on the level of excess earnings. For 2025, the tiers and exact rates require confirmation.

Corporate Income Tax (CIT)

• General Rate: The standard CIT rate in Spain is 25%.
• Reduced Rates: Small and medium-sized enterprises (SMEs) and micro-enterprises may benefit from reduced CIT rates. For micro-enterprises (turnover under €1 million) in 2025, the rate is expected to be 21% for the first €50,000 of taxable profit and 22% for the remaining amount. Medium-sized companies (turnover under €10 million) are expected to have a 24% rate in 2025. Exact rates and thresholds for 2025 may require confirmation.

Tax Relief for Expats (Beckham Law)

• Foreign workers relocating to Spain can opt for a flat income tax rate of 24% for their first six years of residence under specific conditions.

Income Tax (Personal Income Tax - PIT)

• Progressive Rates: Personal income tax in Spain operates on a progressive scale, meaning higher earners pay a higher percentage. The specific brackets and rates for 2025 require further confirmation.
• Tax Return Filing: Employers are responsible for withholding income tax from employee salaries and submitting it to the tax authorities.

Additional Employer Obligations

• Minimum Wage: Employers must adhere to Spain's national minimum wage.
• Working Hours and Leave: Employers need to comply with regulations on working hours, including overtime limits, and paid leave entitlements.
• Remote Working Allowance: If employees work from home 30% or more of the time, a remote working allowance may be required. The precise amount depends on collective bargaining agreements and individual arrangements.

Important Dates and Deadlines

• Tax Year: The tax year in Spain is the calendar year (January 1 to December 31).
• Income Tax Return Filing: The filing period for income tax returns usually begins in April and ends in June of the following year. The exact dates for 2025 are yet to be announced.

It is important to note that the provided information is valid as of today, February 5, 2025, and may be subject to change. It's essential to consult official sources for the most up-to-date information and regulations.

In Spain, employees are subject to various tax deductions, primarily income tax and social security contributions, influenced by factors like income level, residency status, and specific deductions.

Income Tax (IRPF)

As of 2025, Spain's income tax (Impuesto sobre la Renta de las Personas Físicas or IRPF) follows a progressive system with rates and brackets updated for the year:

• Up to €12,450: 19%
• €12,451 to €20,200: 24%
• €20,201 to €35,200: 30%
• €35,201 to €60,000: 37%
• €60,001 to €300,000: 45%
• Over €300,000: 47%

Beckham Law

The Beckham Law offers a flat income tax rate of 24% for qualified foreign workers relocating to Spain for employment. This applies to Spanish-sourced income, potentially providing significant savings compared to standard progressive rates. Note that certain income types like inheritances, capital gains, and gifts sourced within Spain are excluded from Beckham Law benefits.

Tax Deductions and Allowances

Several deductions and allowances can reduce taxable income for residents:

• Personal Allowance: €5,550 (under 65), €6,700 (65+), €8,100 (75+).
• Child Allowance: €2,400 (first child), €2,700 (second), €4,000 (third), €4,500 (each subsequent).
• Dependent Relative Allowance: €1,150 (65+), €2,550 (75+).
• Maternity Allowance: €2,800 annually per child under three.
• Energy Efficiency Improvements: Deductions for home improvements related to energy efficiency are available until the end of 2025.
• Electric Vehicle Purchases: Deductions for purchasing electric vehicles and installing charging stations are extended through 2025.

Social Security Contributions

Social security contributions are mandatory for employees in Spain, with contributions split between employer and employee.

Employee Contributions

• Social Security: 4.83% (including MEI).
• Unemployment: 1.55%.
• Professional Training: 0.10%.
• Solidarity Contribution: 0.16% - 0.20% on earnings above €4,909.50 monthly.

Employer Contributions (Informative - not deducted from employee salary)

• General Contingencies: 23.60%
• Unemployment: 5.50%
• Professional Training: 0.70%
• Wage Guarantee Fund: 0.20%

The rates and thresholds for social security and certain income tax deductions (i.e., the solidarity contribution) are subject to annual revisions, therefore, it's best practice to validate these figures at the start of each year. It's important to be aware that these figures can vary.

Additional Considerations

• Tax Year: The Spanish tax year aligns with the calendar year, running from January 1st to December 31st.
• Tax Filing: Those with income from two or more payers exceeding €2,500 are obligated to file a tax return. Generally, the tax filing season in Spain occurs between April and June of the following year.

This information is current as of February 5, 2025. Tax laws and regulations can be subject to change. Consulting with a tax advisor is recommended for personalized guidance.

Value Added Tax (VAT), known as Impuesto sobre el Valor Añadido (IVA) in Spain, is a consumption tax applied on most goods and services.

VAT Rates in Spain

• Standard Rate: 21% (most goods and services). As of January 1, 2025, the standard rate remains at 21%.
• Reduced Rate: 10% (essential goods and services like passenger transport, hotel accommodations, some food items, water, and certain cultural and sporting events).
• Super-Reduced Rate: 4% (basic food items such as bread, milk, cheese, eggs, fruits, vegetables, legumes, cereals, and olive oil, books, newspapers, and medicines). This rate was previously temporarily reduced to 0% for some basic foodstuffs but reverted to 4% on January 1, 2025.
• Zero Rate: Applies to specific goods and services like exports, intra-community supplies of goods, and certain international transport services.

VAT Registration

• There is no VAT registration threshold in Spain. Any business supplying taxable goods or services in Spain must register for VAT before conducting business, irrespective of turnover. This applies to both resident and non-resident businesses.

VAT Filing and Payment

• Filing Frequency:

  • Monthly: Businesses with an annual turnover exceeding €6,010,121.04 in the previous year, or those participating in the monthly VAT refund scheme, file monthly.
  • Quarterly: Businesses below the above turnover threshold typically file quarterly.

• Deadlines:

  • Monthly: The 20th of the following month.
  • Quarterly: The 20th of the following month for the first three quarters. The deadline for Q4 (October-December) is January 30th of the following year.

• Annual Summary: An annual summary VAT return (Modelo 322) is due by January 30th of the following year. This applies to most businesses, including those filing monthly or quarterly VAT returns.

• Payment: VAT payment is due concurrently with the return filing.

Exempt Goods and Services

Certain goods and services are exempt from VAT in Spain, including:

• Healthcare, education, and social welfare
• Financial and insurance services
• Real estate transactions (with some exceptions)
• Cultural and sporting activities (some exceptions apply, with specific rates for certain events)
• Betting and gambling.

It's important to consult official sources for detailed information. Regulations are subject to change, and this overview is current as of February 5, 2025.

Spain offers various tax incentives for individuals and businesses in 2025. These incentives aim to stimulate economic activity, attract investment, and support specific sectors. As of today, February 5, 2025, here's a summary:

Individual Tax Incentives

• Beckham Law: This special regime allows qualifying foreign workers and entrepreneurs to be taxed at a flat rate of 24% on Spanish-sourced income up to €600,000 for the first six years of residency. Income exceeding this amount is taxed at 47%. This is significantly lower than the standard progressive income tax rates, which can reach up to 47%. Eligibility requirements include being a new tax resident in Spain and having a work contract in Spain. The Beckham law is also available to highly qualified entrepreneurs and self-employed workers who provide services to emerging companies (startups), as well as spouses and children under 25.

• Non-Habitual Resident Regime (NHR): The NHR offers tax benefits to individuals who become tax residents in Spain and haven't been Spanish tax residents in the previous 10 years. This regime allows for exemptions or reduced taxation on certain types of foreign-sourced income, such as dividends, interest, and capital gains.

• Savings Incentive: Modifications to the savings scale in Personal Income Tax (IRPF) benefit small savers with lower tax rates in the initial brackets.

Business Tax Incentives

• Reduced Corporate Tax Rates for Small and Micro-enterprises:

  • Micro-enterprises (net turnover under €1 million): 23% in 2025 (lowered progressively from 21%), 20% from 2029 onwards. The excess over €50,000 will follow a similar trend reducing to 20% from 2027.
  • Small businesses (net turnover under €10 million): 24% in 2025 and will be gradually lowered to 20% from 2029 onwards.
  • Cooperatives classified as "fiscally protected": 20%.

• Capitalization Reserve: Companies can deduct a portion of their profits if allocated to strengthening their financial structure, promoting reinvestment.

• VAT Reductions and Exemptions:

  • Reduced VAT rate for olive oils (4%).
  • A special franchise regime for freelancers simplifies tax management for small businesses, allowing operation without charging VAT below a certain income threshold.

Other Tax Incentives

• Government Service Pensions: Government service pensions (fire service, police, civil servants, armed forces, and local authorities) are exempt from Spanish tax. However, the pension amount is included when calculating the overall tax burden.

• Tax Relief for Retirement Plans: Tax breaks for employers and relaxed contribution limits for employees encourage retirement plan participation. (Effective July 2, 2023).

• Tax Breaks and Incentives for landlords to provide affordable housing, particularly to younger people.

It's important to consult with a tax advisor for personalized guidance regarding eligibility and application procedures for these tax incentives. Tax laws are subject to change, so it's crucial to stay updated on the latest regulations. This information is current as of February 5, 2025.