Corporation Tax (IS)

Corporation tax is the tax obligation assumed by legal persons having obtained income in a fiscal period that is usually a calendar year. That is, this tax element taxes the income of companies and other legal entities.

Through this type of tax, the organization in question declares its economic capacity, since it states that it has received income. This tax provides an important part of the State’s income and therefore can be understood as complementary to the IRPF within the fiscal landscape.

Who pays the corporate tax?

Corporation tax falls on different types of legal persons, such as societies, associations, groupings, foundations and institutions. In addition, it is also legally applicable to other entities present in the economic reality such as funds (for example, investment or pension funds). Corporation tax also affects those organizations that reside or have their fiscal domicile in the country.

Of course, this type of tax also affects limited companies or sole proprietorships, including people who enjoy the status of autonomous subject.

Characteristics of corporate tax

Corporation tax is direct, personal and periodic, as is the income tax of individuals (IRP). Although unlike the IRP, the corporate tax rate is proportional. It does not increase as benefits increase. All companies pay the same tax rate. Of course, in monetary terms the more benefits are obtained, the greater the amount to be paid.

On the other hand, there are a number of incentives for which entities are able to reduce the amount of taxes they pay. These incentives are granted to companies if they meet a series of conditions related to the number of employees they have, investment in innovation, employee training, the level of turnover they present annually or the age of their economic activity, Among other conditions.

Therefore, the corporate tax is:

  • Direct :Taxes income directly, which is proof of the aforementioned economic capacity of the declarant. See difference between direct and indirect taxes .
  • Personnel:This involves taking into account the individual circumstances of each taxpayer.
  • Newspaper:It is paid periodically. The taxable event occurs indefinitely over time. The tax is not punctual or instantaneous, but it is paid continuously over time in different tax periods, divided according to the legislator (for example annually).
  • Proportional or flat :The tax rate does not depend on the tax base, that is, the percentage of taxes paid on benefits is the same regardless of the amount of benefits.

Corporation tax in the income statement

Corporation tax is the last thing that is discounted in the results of a company:

 Income Statement

Example
   Net income or sales 100
– Direct costs of goods sold -fifty
   Gross margin fifty
– General, personnel and administrative expenses -twenty
   EBITDA  30
– Amortization expenses and provisions -5
   Profit before interest and taxes (BAIT) or EBIT 25
+ Extraordinary income one
– Extraordinary expenses -two
   Ordinary result 24
+ Financial income two
– Financial expenses -3
   Profit before tax (BAT) or EBT 2. 3
– Corporation tax 7
   NET PROFIT OR FINANCIAL YEAR RESULTS 16

Corporation tax in Spain

We find the following tax rates after the last modification of the Corporate Tax Law:

PASSIVE SUBJECTS TYPES  2015 2016
General type   28% 25%
Newly created entities, except that they are taxed at a lower rate, the first period with positive BI and the following will apply this scale   fifteen% fifteen%
Entities with turnover <€ 5 M and staff <25 employees   25% 25%
Companies Reduced Dimension (turnover <€ 10M), except that they are taxed at a different rate from the general BI share up to € 300,000 25% 25%
Rest 28% 25%
General insurance mutuals and social security mutual societies   25% 25%
Mutual guarantee societies
Professional associations, official chambers and workers unions
Non-profit entities that comply with Law 49/2002
Employment Promotion Funds
Unions and confederations of cooperatives
Public Law Entity State Ports and Port Authorities.
Communities holding neighborhood forests in common hands
Political parties (Art. 11 LO 8/2007)
Cooperative credit societies and rural savings banks Cooperative Result 28% 25%
Extracoop result 30% 30%
Fiscally Protected Cooperatives Cooperative Result twenty% twenty%
Extracoop result 28% 25%
Publicly traded investment companies in the real estate market. (SOCIMI) (Art. 9 Law 11/2009) Usually 0% 0%
  19% (1) 19% (1)
Non-profit entities that do comply with Law 49/2002   10% 10%
Entities of the Canary Islands Special Zone (Art. 43 Law 19/1994)   4% 4%
SICAV with certain conditions indicated in art. 29.4 LIS that refers to Law 35/2003 on Collective Investment Institutions   one% one%
Investment funds of a financial nature with certain conditions indicated in art. 28.5.b) TRLIS
Real estate investment companies and funds with certain conditions indicated in art. 29.4 LIS
Mortgage Market Regulation Fund
Pension funds   0% 0%
Credit institutions, as well as those dedicated to exploration, research and exploitation of hydrocarbon deposits and other regulated activities in Law 34/1998   30% 30%

(1) Special tax on dividends distributed to partners with a share in the share capital equal to or greater than 5% and said dividends, at the headquarters of the partner, are exempt or taxed at a rate of less than 10%.

 

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