1. More favourable corporate tax rate
One of the biggest tax advantages of incorporating a company in Spain is the treatment of Corporate Income Tax (IS) compared to Personal Income Tax (IRPF).
- General rate of 25%: Companies are taxed under IS at a fixed rate of 25% on profits, which in many cases is more advantageous than being taxed as self-employed under IRPF, where the progressive brackets can be as high as 47% on the highest incomes.
- Reduced rate for new companies: Newly created companies can benefit from a reduced rate of 15% during the first two years in which they make profits.
2. Possibility of tax deductions
Companies have access to a wide range of tax deductions for corporate income tax purposes, thus reducing the effective tax burden:
- Deductions for R&D&I: Companies investing in innovation can deduct up to 42% of research and development expenditure.
- Deductions for hiring employees: Tax incentives for hiring certain profiles, such as young workers, people with disabilities or permanent contracts.
- Deductions for investments in renewable energies: Companies that invest in energy efficiency can benefit from reductions in their tax burden.
3. Tax deferral
Incorporating a company makes it possible to defer taxation of profits through strategies such as reinvestment or distribution of dividends at fiscally favourable times.
- Reinvestment of profits: Instead of withdrawing profits and taxing them as personal income, a company can reinvest them in assets, machinery or expansion, avoiding immediate taxation.
- Dividend distribution: The company can plan when and how to distribute dividends to shareholders, optimising the tax burden through efficient structures.
4. Tax advantages on the transfer of the company
Companies in Spain can benefit from tax incentives in the case of transfer of the company or sale of shares.
- Income tax exemption: If a shareholder sells its shares and reinvests in another company, it can benefit from personal income tax exemptions.
- Inheritance and Gift Tax reduction: In the case of the transfer of a family business, there are reductions of up to 95% in inheritance tax, provided that certain requirements are met.
5. Less tax burden on social security contributions
Compared to a self-employed person, operating through a company allows for better planning of labour costs and social security contributions.
- A company director can optimise his income through a salary and dividends, instead of paying high self-employed contributions.
- The company can deduct the remuneration of employees and directors as an expense, reducing the taxable base for corporation tax.
6. Special tax consolidation regime
If a company has several subsidiaries, it can benefit from the tax consolidation regime, which allows:
- Offset losses and profits between the different entities of the group.
- Reduce the overall tax burden of the corporate group.
- Optimise tax planning within the corporate structure.
For all the above reasons, incorporating a company in Spain offers significant tax advantages over operating as an individual. From a lower tax rate, to tax deductions, tax deferral and benefits in the transfer of business, companies allow for more efficient tax planning.
At sfabogados.com, we offer specialised advice to structure your business in the most advantageous way from a tax and legal point of view. Consult our experts to optimise the taxation of your company.
