Spain's Tax System and Structure in 2025

Spain’s tax framework is structured across three administrative levels—national, regional (Autonomous Communities), and local—designed to fund public services and infrastructure development. This tiered system allows for both centralized oversight and regional flexibility in taxation policies.

Main Taxes and Rates in Spain

Key Tax Categories

• Corporate Income Tax: A direct tax applied to profits earned by companies incorporated in Spain.
• Personal Income Tax (IRPF): Levied on residents’ worldwide income, with progressive rates depending on income level and region.
• Non-Resident Income Tax (IRNR): Applies to income sourced in Spain for individuals or entities not residing in the country.
• Value Added Tax (VAT): An indirect consumption tax; standard rate applies nationwide except in Canary Islands, Ceuta, and Melilla.
• Transfer Tax, Stamp Duty, and Capital Tax: Regulated at the regional level, applicable on property transfers and legal documentation.
• Inheritance and Gift Tax: Varies significantly between regions, with some offering substantial reductions or exemptions.
• Wealth Tax: Imposed on individual net worth above certain thresholds; not levied on corporations.
• Excise Duties: Applied to specific goods like alcohol, tobacco, and energy products.
• Property Tax (IBI): A municipal tax based on the cadastral value of real estate.
• Tax on Economic Activities (IAE): A local license tax for businesses conducting professional or commercial operations.
• Digital Services Tax (DST): Nationally applied levy targeting digital platforms generating revenue from user data and online advertising.

Corporate Income Tax in Spain

The standard corporate tax rate in Spain remains at 25% as of 2025. Small and medium-sized enterprises (SMEs) with annual turnover under €7.5 million may benefit from a reduced rate of 20% on the first €300,000 of taxable income. Additional deductions are available for R&D investments and reinvested profits, encouraging innovation and business growth.

Personal Income Tax Overview

To be considered a tax resident in Spain, an individual must meet one of the following criteria:

• Stay in Spain for more than 183 days within a calendar year (physical presence test).
• Have the core of their economic interests or professional activities based in Spain (economic ties test).

Residents are taxed on their global income, while non-residents pay tax only on Spanish-sourced earnings. The tax year follows the calendar year, and annual returns must be filed by June 30 of the following year through the Agencia Tributaria (Spanish Tax Agency). Regional governments set their own marginal rates, leading to variations—for example, Madrid offers lower surcharges compared to Catalonia or Andalusia.

Non-Resident Income Tax

This tax applies to:

• Permanent establishments of foreign companies operating in Spain.
• Foreign entities earning income from Spanish sources.
• Non-residents receiving rental income, capital gains, or other domestic earnings.

To prevent double taxation, Spain has signed over 90 bilateral tax treaties. Beneficiaries claiming treaty relief must provide a valid Certificate of Tax Residency issued by their home country’s tax authority.

Value Added Tax (VAT) in Spain

The standard VAT rate is 21%, applied to most goods and services. Reduced rates include:

• 10%: Applicable to hospitality, transportation, and certain agricultural products.
• 4%: Covers essential items such as basic foodstuffs, books, medicines, and child car seats.

Note that the Canary Islands operate under a different regime called IGIC (General Indirect Tax on Consumption), with rates ranging from 0% to 7%, while Ceuta and Melilla apply IPSSIM (a special indirect tax) instead of VAT.

Digital Services Tax (DST)

Introduced on January 16, 2021, Spain’s DST imposes a 3% tax on revenues derived from:

• Online advertising services.
• Digital intermediation platforms (e.g., marketplace commissions).
• Sale of user-generated data collected via digital interfaces.

The tax targets large multinational tech firms with global revenues exceeding €750 million and Spanish revenues over €3 million. It aligns with EU efforts to ensure fair taxation of digital economies, though it operates independently pending broader OECD agreements.

Special Economic Zones and Incentives

Spain supports economic development through designated zones offering regulatory and fiscal advantages.

Free Trade Zones (FTZs)

Five official FTZs exist in Barcelona, Cádiz, Vigo, Las Palmas, and Santa Cruz de Tenerife. These areas allow foreign goods to enter without immediate customs duties, provided they remain within the zone or are re-exported. Activities permitted include packaging, assembly, quality control, and processing. While import tariffs are deferred or waived, standard domestic taxes (such as corporate and VAT) still apply to any sales into the Spanish market.

Technology Parks and Innovation Hubs

Over 80 high-tech parks across Spain foster innovation in sectors including:

• Information technology and telecommunications.
• Biotechnology and pharmaceuticals.
• Clean energy and environmental engineering.
• Advanced manufacturing and robotics.

Notable examples include the Madrid Science Park and the Parc Tecnològic del Vallès near Barcelona. Companies located in these zones often qualify for grants, R&D tax credits, and streamlined licensing procedures. Some regions also offer reduced wealth or corporate tax rates for startups and knowledge-based enterprises.

For international employers and expatriates navigating Spain’s complex tax landscape, SailGlobal provides expert cross-border HR and compliance solutions tailored to mobility, payroll, and legal integration in Spain and beyond.