Tax commitments of a subsidiary company in Spain: two main groups
The tax commitments of a subsidiary company in Spain can be divided in two groups:
- Direct taxes. These include the preparation and filing of the Resident Corporate Income Tax and the Economic Activity Tax (when applicable).
- Indirect taxes. These include the preparation and filing of the quarterly and yearly VAT (Value Added Tax) forms, together with the Personal Income Tax forms based upon the withholdings of the employees/providers of the company in Spain and the payments to the Social Security.
What prompts this separation between “direct” and “indirect” taxes? This was actually established by the Spanish Tax Agency in order to separate the taxes upon the company’s income or assets on one hand, and the consumption taxes on the other. Direct taxes are levied on any direct manifestation of the company’s financial capacity (money in the bank account, assets, investments, incomes etc.), while indirect taxes are levied on the company’s consumption. For instance, these taxes are applied when the company hires services from providers or pays the employees’ payrolls, and on transfers of property and/or rights.
Direct taxes for subsidiary companies in Spain
Among the different commitments of a subsidiary company in Spain, the first direct tax to be filed in is the Corporate Income Tax (CIT). All companies established in the Spanish territory are subjected to file it in 6 months and 25 days after the tax closing year. The tax quota is 25% Taxable base: during the first two years of activity there are interesting deductions aimed to help entrepreneurs start their business. On the other hands, CIT payments on account are due to be filed on 20th April 20th October and 20th December. These dates do not change in any case, regardless of the tax year-end. Payments on account are applied on two methods:
- Quota-based method (in case of Client). It involves anticipating 18% of the last CIT annual form from prior year
- Base method (provided the annual turnover exceeds 6MM euros). A payment of the 17% over the taxable base arisen. In case the turnover exceeds 10MM, the new Spanish tax regulation states to pay 24% instead of 17%
To cut a long story short: all subsidiary companies created in Spain in 2018 must pay the corresponding CIT before 25th July, 2019 and make the payments on account of the following tax year in April, October and December 2020. For of client, payments of account for November 2018, December 2018 and April 2019 will be 0 euro. The quota to pay would start on November 2019, in case there are profits for 2018 year.
Another essential direct tax belonging to the tax commitments of a subsidiary company in Spain is the Economic Activity Tax (EAT). This is a tax fee that the Spanish Tax Agency charges upon all activities registered in Spain. Newly-founded companies are free from paying this fee during the first 2 years of activity.
What about indirect taxes?
The direct taxes for subsidiary companies in Spain are the ones involving a greater financial outlay for all the business. Nevertheless, indirect ones also take their share though in this case they are only levied on consumption expenses, as stated before. Among them, the most important one is the Value Added Tax (VAT). This fee is paid every quarterly (on April 20th, July 20th and October 20th of the current year and on January 20th of the following) by filing in the corresponding forms. Also, annual returns are due to be filed and prepared.
Get some good advice… And relax!
As it has been stated in this post and in our former post about mercantile commitments of a subsidiary Company in Spain, the Spanish tax system can be tricky and overwhelming. There are many forms to be filed in, deadlines to meet… So it is always worthy to get advice and support from the best professional teams. In LEIALTA we will help you to file in, manage and control your subsidiary company’s taxes with all the efficiency that sets us apart. Let us help you when setting up a business in Spain with no complications.
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