Corporate tax: tax rates, deductible expenses and news 2022

What is Corporation Tax?

The Corporation Tax is a personal and direct tax levied on obtaining income by companies and other legal entities residing in Spanish territory.

The company’s accounting is essential in calculating the taxable base of the tax and knowing how much will be paid.

Who has to pay the Corporation Tax?

As we have seen, the Corporation Tax (IS) must be paid by legal persons (except civil companies that do not have a commercial purpose) and other entities, even if they do not have legal personality.

For example, they must pay corporate tax: limited liability companies, corporations, labour companies, civil companies with a commercial purpose, foundations and economic interest groups, among others.

In the case of Navarra and the Basque Country, corporate tax is regulated by a specific economic agreement.

On the other hand, certain public sector entities are exempt from paying corporation tax, to which a total exemption is applied, and non-profit entities, to which a partial exemption is applied.

It is important to note that all companies or entities considered taxpayers must file the tax, even if they have not carried out an activity during the year and have not obtained profits subject to corporate tax.

In the case of the self-employed, they will not have to present the IS but will be taxed by the IRPF. In this sense, when a self-employed person exceeds a certain amount of benefits, he usually creates a limited company to pay for IS and reduce his tax burden. In this case, he must keep commercial accounting (daily book, inventory book, annual accounts, and company book) and keep the books for six years after the last accounting entry.

How much is paid in Corporation Tax?

To know how much you will pay in corporate tax, you must calculate the difference between your company’s income and the deductible expenses. To this result, it will be necessary to apply some adjustments, deductions and bonuses and the payments on account made.

Tax rates of Corporation Tax in 2022

Once the tax base has been calculated, the corresponding tax rates must be applied and expressed as a percentage. Currently, they are the following:

• The general rate is 25%
• The special types are as follows:
  • Micro and small companies: 25%.
  • Newly created entities: 15%.
  • Fiscally protected cooperatives: 20%.
  • Non-profit entities that apply the tax regime established by law: 10%.
  • Companies, investment funds and bank asset funds: 1%.

How is the Corporation Tax declared?

The corporation tax is declared through several forms are the following:

• Form 200: it is the annual corporate tax return.
• Form 202: it is the form to make instalment payments of IS, and you must present it if in the last declaration of Form 200 you had a positive result.
• Form 220: it is the annual declaration for groups of companies that are taxed by the fiscal consolidation regime.
• Form 222: is the one used by groups of companies which have benefited from the fiscal consolidation regime for payments on account of the IS.

When is the Corporation Tax paid?

The IS declaration is submitted within 25 calendar days following the six months following the conclusion of the tax period. Therefore, it is submitted and paid between July 1 and 25 of each year if the company’s fiscal year coincides with the calendar year (January 1 to December 31).

What is new in the IS?

The 2022 General State Budgets introduced several novelties in the Corporation Tax Law. They are the following:

• A minimum rate of 15% has been set, which will be applied to taxpayers with a turnover equal to or greater than 20 million euros for twelve months and to taxpayers who are taxed under the fiscal consolidation regime. The entities that cannot apply the minimum taxation are:
  • Variable capital investment companies.
  • Investment funds of a financial nature.
  • Real estate investment companies and funds.
  • Pension funds.
  • Real Estate Investment Listed Corporations.
• Newly created entities will have a minimum tax rate of 10%.
• Cooperatives are charged 60% of the full fee.
• Entities included in the special zone of the Canary Islands will apply the minimum rate of 15%.
• A bonus of 40% (previously it was 85%) will be applied to the part of the full fee corresponding to the income from private rental housing that meets the requirements established by law.
• If the withholdings on account, income on account and instalment payments exceed the amount of the IS liquid quota, the Tax Administration will return the excess ex officio.

If you are a corporate taxpayer, you must have expert tax advice to study your case and help you reduce your tax burden, deduct the expenses the corporate tax law allows, and prepare and submit the IS forms. This way, you will avoid inspections by the Tax Agency or possible sanctions for errors in the forms presented.