Guide to Doing Business in Asturias 2024
Taxation on the income of residents in Spain takes the form of two taxes, depending on whether they are natural persons (IRPF - Personal Income Tax) or companies (IS - Corporation Tax)
The Personal Income Tax (IRPF), regulated by Law 35/2006 of November 28, on Personal Income Tax and Partial Modification of Laws on Corporate Income Tax, Non-Resident Income Tax, and Wealth Tax (LIRPF), as its name suggests, taxes the income of individuals, generally following a progressive scale.
The object of the tax is the worldwide income of the taxpayer. The taxpayer is generally an individual who is a habitual resident in Spain. However, individuals who are Spanish nationals but habitual residents abroad may also be taxpayers if they meet certain criteria outlined in Article 10 LIRPF. For example, members of diplomatic missions or Spanish consular offices or those who have moved to a tax haven, with effects for the tax year in which the change occurs and the following four years, are considered taxpayers.
A person is considered to have their habitual residence in Spain when they meet any of the following three criteria:
These criteria are alternative, meaning that meeting any one of them would make an individual a habitual resident in Spain. If none of them are met, the individual may be considered a taxpayer under the Non-Resident Income Tax.
However, individuals subject to the Non-Resident Income Tax residing in a European Union member state or European Economic Area country with effective information exchange can choose to be taxed as Personal Income Tax taxpayers if they have earned 75% of their worldwide income in Spain from labor and economic activities.
Once the requirements for habitual residence in Spain at the national level have been met, residence in Asturias will be determined according to the following criteria (Article 72 of the Personal Income Tax Law - LIRPF):
Unlike the criteria for determining habitual residence in Spanish territory, in this case, there is a priority order, with permanence being the preferred criterion, and the last declared residence being the one to follow if the previous ones are not applicable.
The Personal Income Tax Law regulates a special tax regime, recently improved after the approval of Law 28/2022, of December 21, which promotes the ecosystem of emerging companies (Startup Law). This regime applies to workers, professionals, entrepreneurs, and investors who relocate to Spanish territory. It allows them to choose to pay taxes, during the tax period in which the taxpayer acquires tax residence in Spain and the following five years, based on the rules of the Non-Resident Income Tax (with some exceptions). Depending on the specific case, this option could be more beneficial for the taxpayer.
However, to apply this regime, certain requirements must be met, such as:
Since 2023, the regime can also be applied to the spouse or parent of their children, children under 25, and children with disabilities regardless of their age, if they meet certain conditions.
The exercise of the option must be communicated to the tax administration by submitting Model 149 within a maximum period of 6 months from the start date of the activity indicated in the Social Security registration in Spain or in the documentation that allows, where appropriate, maintaining the legislation of the home country's Social Security, Article 116 of Royal Decree 439/2007, of March 30, approving the Regulations of the Personal Income Tax and amending the Regulations on Pension and Retirement Plans, approved by Royal Decree 304/2004, of February 20 (RIRPF). Requests submitted outside of this period will not take effect. The 6-month period does not depend on the moment when tax residence is acquired in Spain, although becoming a resident in Spain is a prerequisite to exercise the option.
Depending on their origin, there are different types of income (employment income, rental income, capital gains and losses, etc.). Among these income types, we have income derived from economic activities, defined as those that, arising from personal work and capital together or just one of these factors, involve the taxpayer's self-management of production means and human resources, or one of them, with the purpose of intervening in the production or distribution of goods or services.
Additionally, since 2015, income derived from an entity in which the taxpayer holds capital and arises from general professional activities will be classified as professional income when the taxpayer is included, for this purpose, in the special Social Security regime for self-employed workers, or in a social security mutual fund that acts as an alternative to the aforementioned regime.
On the other hand, the leasing of properties is considered an economic activity only when at least one full-time employed person with a labor contract is used for its organization.
Finally, there are three methods for determining the net income from economic activities exercised by the taxpayer: normal direct estimation, simplified estimation, and objective estimation. It should be noted (especially for incentive purposes) that most of the Corporate Income Tax (IS) rules are applicable to these taxpayers.
As a general rule, the tax period corresponds to the calendar year. In these cases, the tax is due on December 31 of each year.
For tax calculation purposes, different types of income are classified into two groups: general income and savings income. The income from economic activities falls into the general income category. To obtain the General Taxable Base and the Savings Taxable Base, any applicable deductions must be subtracted. Once these are obtained, if applicable, the personal and family minimums are quantified and allocated to the general part, and if they exceed that, also to the savings part. At this stage, the minimums are only calculated and allocated; their specific application is made by deducting them from the gross tax.
The latter is the result of adding:
The regional tax scale applicable in Asturias to the General Taxable Base is established by Article 2 of Legislative Decree 2/2014, of October 22, approving the consolidated text of the legal provisions of the Principality of Asturias regarding taxes ceded by the State. However, the State does not grant Autonomous Communities the power to approve their own tax rates for the Taxable Savings Base, so the rate approved by the State for the regional segment will apply.
Next, deductions would be applied to determine the net tax. There are both state deductions and those specific to the Autonomous Community of the Principality of Asturias.
These provide a way to prepay resources to the Treasury in anticipation of the final tax, simultaneously allowing taxpayers to spread the payment effort. These include withholding taxes, advance payments, and installment payments. All of these are deductible from the Gross Tax.
Income Tax is filed annually by completing the Form 100 approved for each fiscal year by the Ministry of Finance and Public Function, and the filing deadline typically falls between the months of April and June each year, as determined in the Ministerial Order approving the form.
Corporation tax (IS) taxes the income obtained by entities that operate on the market.
The object of the Tax is the worldwide income of taxpayers; the latter are, when they have their residence in Spain, entities with legal personality, whatever their form or name (except for civil partnerships which do not have a commercial purpose and which are taxed under the income attribution regime), as well as various entities. without legal personality (investment funds, UTEs, venture capital funds etc.).
Entities that meet any of the following requirements are considered residents in Spain:
Furthermore, the Tax Administration may assume that an entity located in a territory classified as a tax haven has its residence in Spain when its main assets consist of assets located or rights that are fulfilled or exercised in Spain, or when its main activity is carried out in Spain, unless said entity certifies that its effective management and control occur in said country or territory, as well as that the formation and operations of the entity fulfil valid economic grounds and substantive business reasons other than the management of securities or other assets.
On the contrary, if it is not considered a resident in Spain, the entity may be regarded, where appropriate, as an IRNR (Income tax for Non-residents) taxpayer.
The Taxable Income of the Tax may be determined based on three estimation methods: direct, objective and indirect.
Under the direct estimation regime (generally applicable), the Taxable Income for Corporation Tax will be formed based on the amount of the accounting profit/loss determined in accordance with commercial regulations, corrected in the tax adjustments (positive and negative) considered in the LIS, whether owing to differences in classification, valuation or imputation. Hence, solely for the sake of illustration and not limited to, some of the non-accounting tax adjustments that could be applicable are:
The BINs from previous years may be offset by the positive income of the following tax periods without any time limit (since 2015), but with the quantitative limit of 70% of the Previous Taxable Income (this is the Taxable Income before applying the offsetting and capitalisation reserve of BINs). However, this latter limit will be 50% for those entities whose Net Turnover Amount (INCN) for the 12 months prior to the date on which the tax period begins falls between 20 (inclusive) and 60 million euros, and 25% when it is at least 60 million euros. In any case, this quantitative limit will not apply to newly created entities in the first three tax periods in which positive Taxable Income is generated prior to its offsetting.
However, with exclusive effects for tax periods beginning in 2023, the offsetting of BINs, within the tax consolidation group, has also been limited to 50% of the negative taxable income of the individual entities that are members of the tax group. With effects for the following tax periods, the individual BINs not included in the Taxable Income of the tax group by application of the above, will be integrated into the taxable income thereof in equal parts in each of the first 10 tax periods that begin in 2024, even in the event that any of the individual entities referred to is excluded from the group. Finally, if the tax group is terminated or lost, the individual BINs pending integration into the group's Tax Base will be integrated into the last tax period in which the group pays taxes under the tax consolidation regime.
In any case, BINs can always be offset in the tax period up to the figure of 1 million euros (unless the tax period has a duration of less than one year, in which case it will be carried out proportionally). In any case, the offsetting cannot result in a negative amount, having as a limit the actual Prior Taxable Income, with the rest of the BINs being left pending to be applied in subsequent years.
Finally, BINs cannot be offset when the following circumstances occur:
The general tax rate is 25%, with other reduced tax rates which are applicable in special cases (we have listed some of the most important ones). Hence, starting in 2023, a new reduced tax rate of 23% is introduced for entities whose INCN for the immediately preceding tax period is less than 1 million euros.
A partir de 2023:
| NUEVO TIPO DE GRAVAMEN REDUCIDO DEL 23% | para las entidades cuyo INCN del período impositivo inmediato anterior sea inferior a 1 millón de euros |
|---|---|
| TRIBUTAN AL 15% | las entidades de nueva creación en el primer período impositivo en el que la Base Imponible resulte positiva y en el siguiente |
| TAMBIÉN AL 15% | empresas emergentes en el primer período impositivo en el que tengan base imponible positiva y en los tres siguientes, siempre que mantengan su condición |
| TRIBUTAN AL 10% (POR LAS RENTAS NO EXENTAS). | Por otro lado, las entidades sin fines lucrativos a las que resulta de aplicación la Ley 49/2002, de 23 de diciembre, de régimen fiscal de las entidades sin fines lucrativos y de los incentivos fiscales al mecenazgo |
Additionally, since 2022, there has been minimum taxation in corporation tax which, in general, is a limitation of the net tax liability to 15% of the Taxable Income for those taxpayers whose INCN is at least 20 million euros during the 12 months prior to the beginning of the tax period (or who pay taxes under a tax consolidation regime regardless of their INCN). In any case, it will not apply to those taxpayers who pay taxes at a rate of 10% or lower.
There are two methods of eliminating double taxation in Spain, both domestically and internationally, which are exemption and deduction. If they did not exist, the same income would be subject to double taxation, either for the same (legal) or different taxpayers (economic).
So, to avoid domestic double taxation, the exemption method is established in the LIS (art. 21), whilst to avoid international double taxation both methods coexist (exemption - articles 21 and 22 - and deduction -articles 31 and 32-).
A. Exemption from dividends and capital gains deriving from the transfer of shares or stakes (art. 21 LIS).
This exemption method applies whether the investee entity is Spanish or foreign, thus correcting double taxation through non-integration into the Taxable Income.
Hence, the first section regulates the exemption on dividends and profit-sharing deriving from entities both resident and non-resident in Spain, as long as the following requirements are met:
In turn, the third section regulates the exemption on the transfer of shares or stakes from entities both resident and non-resident in Spain, as long as the same requirements are met as for the previous case of dividends and profit-sharing The same regime will apply to any income obtained in the event of liquidation of the entity, removal of the member, merger, total or partial split, reduction of capital, non-monetary contribution or global transfer of assets and liabilities.
In both cases, since 2021 this exemption method has attained 95% of the amount of dividends or positive income, in general, as there has been a 5% reduction owing to management expenses.
B. Exemption of income obtained abroad through PE (art. 22 LIS)
The exemption method established in article 22 LIS will apply whenever positive income is obtained through a Permanent Establishment abroad and this has been subject to and not exempt from a tax of an identical or similar nature to the Spanish corporation tax, with a nominal rate of at least 10%. However, the taxation requirement will be deemed to have been fulfilled when the PE is located in a country with which Spain has signed an International Double Taxation Agreement with an information exchange clause.
This regime will not be applicable to income from foreign sources that the entity integrates into its Taxable Income and in relation to which it chooses to apply, where applicable, the deduction established in article 31 LIS.
C. Deduction to avoid legal international double taxation: tax borne by the taxpayer (art. 31 LIS)
This method to avoid legal double taxation when obtaining income abroad is applicable, whether this income has been obtained with or without a PE.
The application of this deduction consists of including in the taxpayer's Taxable Income any income obtained and taxed abroad, as well as the tax paid abroad, and deducting from the gross tax liability the lesser amount between: (i) the effective amount of that which was paid abroad due to a tax of a nature identical or similar to Spanish corporation tax and, in the case of application of a DTC, the deduction may not exceed the attendant tax according to the latter; or (ii) the gross tax liability amount that would have been payable in Spain if said income had been obtained in Spanish territory.
Additionally, starting in the financial year of 2015, that part of the tax paid abroad which exceeds the tax that would be paid in Spain and that, hence, is not subject to deduction, will be considered a deductible expense, as long as it pertains to the carrying out of economic activities.
In the event of an insufficient gross tax liability, any amounts not deducted could be deducted in subsequent tax periods.
D. Deduction to avoid international economic double taxation: dividends and profit-sharing (art. 32 LIS)
This deduction is applicable in the event of receiving dividends or profit-sharing paid by a non-resident entity in Spanish territory as long as two requirements are met:
Hence, the tax paid by the non-resident entity in Spanish territory will be deducted with respect to the profits from which the dividends are paid for the attendant amount of said dividends, provided that said amount is included in the Taxable Income.
This deduction, together with that determined in article 31 LIS regarding dividends or profit-sharing, may not exceed the gross tax liability amount that would be payable in Spain for these income amounts if they had been obtained in Spanish territory.
In the event of an insufficient gross tax liability, any amounts not deducted could be deducted in subsequent tax periods.
In the IS, several tax benefits have been regulated in the form of deductions from the gross tax liability (once the deductions for double taxation and bonuses have been made) in order to encourage the performance of certain activities. So, the most important ones are:
A. Deduction for Research and Development activities and technological innovation (R&D and TI)
This deduction is divided, in turn, into two: Research and Development (R&D) on the one hand, and technological innovation (TI) on the other.
Hence, the deduction for R&D attains 25% of the expenses incurred in the tax period in this regard, although if the aforementioned expenses are greater than the average of those incurred in the previous two years, 25% will be applied up to said average, but the rate rises to 42% on the surplus. Furthermore, an additional deduction of 17% of the amount of the entity's staffing costs pertaining to qualified researchers assigned exclusively to R&D will be made. Finally, also additionally, 8% of investments in tangible and intangible assets may be deducted, excluding buildings and land, provided that they are exclusively used for R&D.
In turn, the deduction for technological research attains 12% of the expenses incurred in the tax period for this item.
It should be taken into account that the subsidies received to promote said activities reduce the base of the deduction, in both cases.
B. Deduction for investments in film productions, audiovisual series and live performing arts and musical shows.
This deduction is divided, in turn, into two: cinema/series, on the one hand, and public shows on the other.
Hence, the deduction for films/series is 30% of the first million basis of the deduction and 25% of the surplus of said amount.
In turn, the deduction for music/theatre attains 20% of the expenses incurred, with a limit of €500,000 per taxpayer in each tax period (in other words, a maximum investment of 2 and a half million euros).
As in the previous section, the base of the deduction will be reduced by the amount of subsidies received to finance this type of investment.
However, the majority of producers do not obtain enough share to apply said tax incentives, which is why other taxpayers are allowed to apply these tax credits, thereby incentivising culture in Spain, both through the financing agreement model (with a maximum deduction amount for the financing entity of 120% of the amount invested) or through an EIG structure, also taking advantage of the BINs (the latter could also be applicable for the deduction for R&D and TI).
C. Deduction for job creation of workers with disabilities.
This deduction, which pertains to employment generation policies and special care of individuals with greater difficulty in accessing it, is materialised by the following amounts:
Accordingly, it is a necessary requirement for the average workforce of employees with a degree of disability equal to or greater than 33% in the applicable tax period with respect to the immediately preceding tax period to be increased.
D. Common regulations
Furthermore, it is common to all these deductions that the amounts pertaining to the tax period not deducted may be applied in the settlements of the tax periods that end in the immediate, subsequent 15 years. However, those pertaining to the deduction for R&D and TI have a term of 18 years.
On the other hand, all the deductions planned to encourage the performance of certain activities (the deduction for job creation through an indefinite contract to support entrepreneurs, which has not been commented on in this text due to its limited application, must also be taken into account for these purposes) may not exceed 25% of the Positive Adjusted Gross Tax Liability. However, this limit is raised to 50% when the amount of deductions for R&D and TI and film/series/music/theatre which pertain to expenses and investments made in the tax period itself exceeds 10% of said Positive Adjusted Gross Tax Liability.
Finally, the assets subject to these deductions must remain in operation for 5 years, or 3 years, if they are movable assets, or during their working life if this is shorter.
LIS considers certain special corporation tax regimes, either due to the nature of the taxpayers concerned or due to the nature of the facts, acts or operations in question. Below we are going to take a look at some of the most important ones:
A. Tax neutrality regime in corporate restructuring operations (RENF)
This regime is mainly characterised by allowing the deferral of income which may arise in certain types of operations (mergers, splits, contributions of assets, swaps of securities and changes in registered office of a European company or a European cooperative company of a Member State to another EU Member State). Its application is voluntary, although when the requirements are met it is presumed that its application has been opted for, unless specifically indicated otherwise.
In any case, this regime will not apply when the main objective of the operation to which it is intended to apply has is tax evasion or avoidance. In particular, the regime will not be applicable when the operation is not carried out for Valid Economic Reasons (MEV) and the determination of the aforementioned MEVs is extremely important prior to carrying out the operation. These operations must be planned in great detail, since the application of RENF entails significant tax savings. And, on the contrary, its non-application or questioning can have a very significant fiscal impact.
B. ETVE Regime
This tax regime for entities classified as ETVEs grants Spanish holding type companies which hold foreign securities, important tax benefits.
In reality, these entities are subject to the general IS regime, although with certain special aspects regarding the taxation of capital gains and dividends from foreign sources (exemption of said income, provided that certain legal requirements are met), as well as in relation to the taxation of its members (non-application of taxation in Spain to the outflow of income deriving in turn from exempt income).
However, the ETVE must meet certain requirements, with the main one being having the material and human resources necessary to carry out the activity (compliance with the “substance” requirement).
C. Fiscal consolidation regime
For IS purposes, a tax group is assumed to be the set of companies which, being residents in Spanish territory, comprise a parent company (the only one which may be non-resident) and all its subsidiaries in which the former has a stake of - at least, and in general - 75% of its share capital and over which it has the majority of voting rights.
Consequently, whenever the aforementioned stake and control requirements are met, the entities for which they are complied with will be compulsorily integrated into the existing tax group, with effects in the following tax period, unless they are newly created entities in which case the integration will occur from that time onwards.
So, the fundamental characteristics of the special tax consolidation regime which could determine overall taxation lower than that deriving from the application of the general regime, are the following:
Consequently, whenever the application of the special tax consolidation regime is opted for, the tax group will be taken to be a single taxpayer for IS purposes, with only the economic unit that the group represents being subject to taxation. Finally, it should be noted that the tax consolidation regime will be applied when agreed upon by each and every one of the entities that must make up the tax group, also being subject to compliance with certain requirements and obligations.
As a general rule, the tax period coincides with the entity's financial year. In these cases, the tax will accrue on the last day of the financial year.
As already mentioned with regard to personal income tax (IRPF), these are withholdings, payments on account and instalment payments. All of them will be deductible from the IS net tax liability.
A. Withholdings and Payments on account
Certain income will be subject to withholdings or payments on account by the person who pays them, depending on whether they are monetary or in kind, respectively (i.e. dividends and interest).
B. Instalment Payments
The instalment payment on account of IS is an obligation that must be made during the first 20 calendar days of the months of April, October and December. Consequently, taxpayers must make the payment on account of the future settlement pertaining to the current tax period on the first day of said months.
Forms 202 and 222 must be used to complete and submit the instalment payments. The former will be used by companies subject to the general regime, whilst the latter will be used by companies subject to the tax consolidation regime.
Finally, there are two different methods to determine the amount of the instalment payment: (a) the procedure of article 40.2 LIS, general or tax liability; and (b) the procedure of article 40.3 LIS, optional or basic.
IS is filed each financial year by completing Form 200 (or 220 in the case of tax groups) approved for these purposes by the Ministry of Finance and Public Administration, and the submission period is 25 calendar days subsequent to the 6 months following the conclusion of the tax period (25 July of the following year, in the event that the tax period is equal to the calendar year).
The IS settlement scheme is as follows:
Accounting profit/loss
+- off-balance sheet tax adjustments
= Previous Taxable Income
- Capitalisation reserve and Negative Tax Income (BINs)
= Taxable Income
x Tax rate
= Gross tax liability
- Deductions for Double Taxation and Bonuses
= Positive Adjusted Gross Tax Liability
- Deductions to provide incentives to perform certain activities
= Positive Net Tax Liability
- Withholdings, payments on account and instalment payments
= TAX PAYABLE OR REFUNDABLE