International Company Relocation Opportunities: Spain
Spain is generally chosen as a place for investments because of its good investment company regime and powerful treaty network.
- Currency: Euro (€);
- Esteemed Administrative Regime;
- Skilled / Semi- Skilled workforce that includes widely available professional and technical workers.
Quality of Life:
- Nice climate;
- In good relations with USA, Africa, and Europe.
Linguistically and culturally, Spain has been recognized as a tactical place to access Latin America. Its favorable network bond with other countries makes it attracting to investors.
Spain recently reduced its corporate tax rate from 28% in 2015 to 25% in 2016. Spain has a decent holding company organization that offers an interest exception for capital gain and profits and a favorable treaty network. Its economy is mainly service-oriented, where service represents over 66% of its GDP.
Spain has wireless technology and a modern transport infrastructure you can find anywhere in the country. Main industries include real estates, tourism, constructions, and manufacturing. Life quality is outstanding with a relatively low cost of living compared to other countries in Europe, which makes it a very appealing destination for expatriates.
With regards to IP, Spain offers a favorable R&D tax system that provides liberal tax credits. If combined with an IP exception, a company can get a low IP income tax rate.
Because of its dependable treaty network and investment companies, Spain is a common choice for investments in South America.
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Corporate Tax Policies: Spain’s standard tax rate has been reduced from 28% in 2015 to 25% from 2016 onwards. There’s an additional 2.5% reduction that can be added in certain circumstances, like when earnings / profit are not dispersed to stockholders.
There’s no further deductible on worthless stocks. Losses from foreign or local subsidiary transfers will become deductible when there are more dividends participating than just the exempted ones. Tax restrictions also happen if the companies’ monetary expenses are more than 30% higher than their operational profit (i.e. EBIDTA).
Capital Duties and Stamp Taxes: There are no stamp or capital duties in effect in Spain since January 01, 2011.
Corporate Tax Exemption: In the event an organization is classified as a Spanish holding company or an ETVE, if certain requirements are met, the company does not have to pay taxes on foreign sourced income (along with the dividends) and on the profit it receives from the sales of foreign participation.
Spain does not impose the tax if the ETVE income (capital gains and dividends) is acquired from non-resident stockholders.
For a company to be ETVE qualified it must have international subsidiary shares with enough significance, and the Spanish Tax Authorities must be notified.
Spain’s CFC Legislation rule applies when the company holds 50% of its stocks and the non-resident tax rate is 75% less than the tax percentage. This rule only applies to certain income types. The anti-avoidance law also applies to capital gains and dividends from subsidiaries residing in a region where taxes are low.
On March 2012, the thin capitalization rule in Spain was changed with a general restriction on Gross monetary expense deductibility. Deductions can be up to 30% of the company’s operating profit within the financial year (Earning – Stripping Law), though monetary expenses are going to be 100% taxable up to €1,000,000.
This limitation applies to the deficit of EU and non –European corporations, and to Spanish enterprises, regardless if the organization is made from connected entities (though there are still some exceptions in the rule application). There’s a particular restriction for the non-deductibility of monetary expenses taken for intra-group loans that are used to sponsor intra-groups’ procurement of stocks or used to boost the capital of their subsidiaries (unless proved for economic reasons).
Withholding taxes: ETVE can convey to its non- Spanish resident stockholders (with no permanent operation in the country), that the profits resulting from receiving a foreign income exemption are WHT free. The WHT’s domestic rate of yearly interest is 19% starting from 2016). The rate can be lowered to 0% within the EU main subsidiary directive. This can be applied to those under treaty countries as well.
Value Added Taxes: 21% is the standard VAT rate. A lower 10% rate applies to recently built properties, restaurants, hotels, and entertainment establishments. A 4% tax rate is applied to food, books, and newspaper products. Insurance, medical services, and financial institutions are VAT exempted.
Dual Tax Arrangements: Spain has 80 arrangements or more in effect in addition to several information exchange agreements with other foreign jurisdictions that allows it to be taken out of the Spanish tax haven negative list.
Foreign Stockholders: A released capital gain from ETVE liquidation or a full/partial sale of a company is tax exempted. However, any parts of the consideration relating to Spanish counterparts are not exempted.
Legal: Spain provides top level recognition and legal protection for trademarks, patents, copyrights, goodwill, know-how, and industrial models and designs.
IP Rules: IP ruling applies to most registered impalpable assets. Business firms can get a 60% IP tax exemption on net income garnered from using (or transferring) qualified IP rights. Qualified IPs may come from information or patents having to do with a commercial, industrial, or a scientific background.
Payments from other sources are not included in this incentive. There’s a 100% reduction in any IP development costs as well. Some exceptions to this rule should be noted if the business that‘s applying for the IP incentive is situated in a specific location in Spain. The incentive is reconcilable with an R&D tax credit and the two incentives can be used simultaneously.
R&D rules: Under Spain’s Research and Development regime, a company can get a tax reduction of 25% to 42% of their R&D expenditure within the taxable year. In case R&D expenses are higher than the average cost of the past 2 years, a 25% rate will be applied while a 42% rate will be applied to the excess.
A supplementary 17% credit is provided for the costs associated with staff payroll that is exclusively designated to R&D tasks, and an 8% deduction on tangible assets that are used for R&D activities exclusively.
Personal Income Tax: Taxes are applied to each individual’s earned and passive income. The rates ranged between 20% and 47% in 2015 and were reduced to 19% - 45% in 2016. Savings income is also taxed between 20% - 24% in 2015, 19% - 23% in 2016, and 25% - 27% onwards.
Contributions to Social Security: Workers pay 6.35% for social security contributions. However, some plain cost has been presented in particular cases.
Expatriate Policy: Spain provides a distinguished administration assigned as a result of a work contract. The eligible expatriates are taxed only for the income acquired in Spain. The tax is a 24% flat rate (47% / 45% if the excess is over €600,000).