If you run a company in Spain — or are thinking of setting one up — Corporate Income Tax (Impuesto sobre Sociedades) is one of the taxes that has the greatest impact on your business’s financial planning. Yet many business owners reach July without a clear picture of what they are actually paying or why.
This article covers the key points: what Corporate Income Tax is, who is required to file it, how the taxable base is calculated, what tax rates apply and when the return must be submitted.
What is Corporate Income Tax?
Corporate Income Tax (IS) is the tax levied on income obtained by legal entities and other entities resident in Spanish territory. Its main legal framework is Law 27/2014, of 27 November, on Corporate Income Tax (LIS), developed by Royal Decree 634/2015.
In essence, it is to companies what Personal Income Tax (IRPF) is to individuals: a tax on profits. The key difference is that the taxpayer here is not a person, but an entity with its own legal personality.
Who is required to file it?
As a general rule, all entities with legal personality resident in Spanish territory are subject to Corporate Income Tax (Article 7 LIS). This includes:
Commercial companies: S.L. (private limited), S.A. (public limited), etc.
Civil partnerships: with a commercial purpose, since the 2016 tax year
Cooperatives: subject to a specific tax regime
Associations and foundations: subject to the special regime for non-profit entities
Civil partnerships without a commercial purpose and jointly owned properties (comunidades de bienes) are not subject to Corporate Income Tax.
How is it calculated? From accounting to tax payable
The starting point is the accounting result — the profit or loss for the financial year. From there, the tax adjustments (positive or negative) provided for in the LIS are applied to arrive at the taxable base.
Accounting result ± tax adjustments = Pre-adjustment taxable base → − offset of prior-year losses = Taxable base × tax rate = Gross tax liability − deductions and allowances = Net tax liability − withholdings and instalment payments = Final tax payable
Tax rates: how much do companies pay?
25%: General rate. Applies to most companies.
23%: For entities whose net turnover in the previous tax period was below €1,000,000 (applicable from 2023, Law 31/2022).
15%: For newly incorporated entities in the first two tax periods in which the taxable base is positive.
10%: For non-profit entities qualifying under Law 49/2002.
A company with turnover below one million euros is taxed at 23%, not 25%. This is a meaningful saving that should be factored into financial planning.
Deductions: legally reducing the tax bill
R&D&I deduction: Articles 35 and 36 LIS. One of the most powerful: allows a deduction of between 12% and 59% of expenditure on research, development and technological innovation.
Offset of prior-year tax losses: No time limit, but capped at 70% of the pre-offset taxable base (Article 26 LIS).
Employment of workers with disabilities: Article 38 LIS.
International double taxation relief: for income already taxed abroad.
Deadlines: instalment payments and annual return
Form 202: instalment payments due in April, October and December each year.
Form 200: annual Corporate Income Tax return. For companies with a financial year ending on 31 December, the filing window is 1 to 25 July of the following year.
Even if the company had no activity or made a loss during the year, it is still required to file Form 200. The obligation to file exists regardless of the result.
Questions about your company’s Corporate Income Tax?
Good tax planning is not about avoiding taxes — it is about understanding the rules and applying them correctly so you do not pay more than you should.
At CPG Abogados we advise companies and self-employed professionals on tax and corporate matters. If you would like to review your company’s tax position, get in touch with us.
