“Corporation tax is something you need to know about if you're thinking of starting a company. Today you're going to find out what it is, how to calculate it and how to declare it”.
One of the most important moments has arrived, tax-wise, for companies: assessment of corporation tax. Although it's routine because you have to do it every year, it's still useful to review a few key aspects of corporation tax you need to keep in mind. And even more so if the company was created recently and it's the first time you have to declare this tax.
What is corporation tax?
Corporation tax is the government tax on the profits earned by companies and other legal entities during the fiscal year.
It is thus both simple and complex at the same time. This is because although it essentially applies to the same thing as personal income tax, that is, earnings, it should be borne in mind that companies are more complex structures and have their own legislation.
In principle, you only pay this tax when there are profits, but there are some specific cases where you have to file it even if there are no earnings.
Important note: corporation tax has nothing to do with VAT or with income tax because corporation tax:
- Applies only to legal persons (companies).
- Has its own rules and tax
Who is required to assess corporation tax?
As we have noted, corporation tax has its own legislation that is separate from that of other taxes, as set out in the Spanish Corporation Tax Act, Law 27/2014
It is a tax on entities with a legal personality that is:
- Direct because it is based on the income they earn.
- Personal because it applies to a specific legal person (the company) in accordance with its own situation and its own features.
But when we say that corporation tax applies to companies, that is not because it takes account of the company's size, but rather the form in which it has been incorporated (legal form) and whether or not it has economic activity (it has earnings).
For this reason we have distinguish between the companies that are obliged to pay this tax and those which are not.
Companies that are required to pay corporation tax
Companies with legal personality:
- Corporations: Public Limited companies (S.A.), Limited Liability Companies (S.L.), Civil Societies for trade.
- Non-profit organisations with an economic activity: associations, foundations, NGOs, professional associations, etc.
- Mutual societies, consortia, compensation boards, irrigation associations and inheritance communities of the Canary Islands.
- Banking foundations.
- Public enterprises and government agencies
Companies without legal personality, but subjects to this tax:
- Temporary Joint Ventures.
- Mutual funds, pension funds, securitisation funds, guarantee funds, venture capital funds or banking assets.
- Economic interest groupings and agricultural processing companies.
Not required to pay corporation tax:
- Agricultural companies, ranchers, forestry companies, mining companies, fishing companies and those of a professional nature, pursuant to the Professional Enterprise Act, Law 2/2007.
- Self-employed workers (individuals that work on a self-employed basis) because they already pay personal income tax.
- Some non-profit organisations or those without economic activity that are exempt under the law.
There are also some companies that, although they would be required to pay corporation tax, Law 49/2002 for taxation of non-profit enterprises and on tax incentives for patronage, specifies that they have exemptions (total or partial). This might include:
- Public bodies such as the Bank of Spain or the Social Security Institute.
- Non-profit entities, where they conform to the Law 49/2002 (for example, some cultural NGOs or foundations).
- The Catholic Church and recognised religious entities for certain types of income.
- Mutual benefit societies, subject to the conditions set out in legislation.
This is why we said that although some of these entities do not pay corporation tax, they do have to submit a declaration when they earn income that may be subject to the tax.
Fundamental concepts for calculating corporation tax
Now let's review the basic terms that we are going to use to calculate corporation tax. So this way, it becomes much simpler to see where each figure comes from and avoid making mistakes in the tax return.
Taxable income/(tax loss)
The tax base is the amount on which the tax will be leved. Tax base is not the same thing that the accounting profit, so let's see how we can calculate it.
To calculate the tax base, we need to know the accounting profit/loss from the following formula:
Accounting profit/loss = Income – Expense.
But this figure cannot be the same as the tax result because, under the law, we have to apply certain adjustments:
- Expense cannot include items that are not tax deductible. That is, those which bear no relation to the activity of the company. Thus, our formula makes no distinction between those which are deductible and those which are not deductible. We are going to have adjust the figure because the tax agency does not allow them to be applied, although they do have to be in your accounting.
- Additions or subtractions have to be made of other temporary permanent differences, such as provisions and/or special amortisations.
Therefore, and to simplify, the Tax Base is the result of the following formula:
Tax Base = Income – Deductible Expenses ± Tax Adjustments
Deductible non-deductible expenses
The law says that we can subtract the expenses from earned income, but provided that they meet these conditions:
- They are related to the economic activity.
- They have an invoice.
- They are recorded in accounting.
That is why we speak of deductible expenses and non-deductible expenses. For example:
- Deductible expenses: those which influence the activity: salaries, rents, supplies, etc.
- Non-deductible expenses: these are unrelated to the activity such as fines, sanctions or personal expenses.
Lastly, it's very important for you to know that deductible expenses include taxes because they count as a tax expense, but not all taxes.
VAT is not deductible, and here questions may arise. What if I have unpaid client invoices that I had declare in VAT? If VAT is not a deductible expense, can these sums be recovered?
The good news is that yes, they can be recovered. To find out how to do this properly, we recommend you learn how to recover the VAT on unpaid invoices.
Tax rate
This is the percentage that is applied to the tax baseto calculate the payable tax. In Spain have a general rate that is applied by default, but there are also others that are lower in certain cases. These are the rates that are going to apply from 2025:
- General rate: 25%.
- Other applicable rates by type of company:
Type of entity |
Tax rate |
Conditions |
Microenterprises |
21% up to €50,000 22% on remainder (2025) |
Turnover < €1 million/year. Progressive reduction down to 17% and 20% in 2027. |
SMEs |
24% (2025) |
Turnover between €1 and 10 million/year. Annual reduction to 20% in 2029. |
Newly established entities |
15% |
In the first and second financial year with positive tax base |
Startups |
15% |
In the first four financial years with positive tax base if they maintain status of startup. |
Tax protected cooperatives |
20% / 25% |
20% cooperative income, 25% non-cooperative. |
Non-profit entities |
10% |
If they are compliant with Law 49/2002. |
Collective investment companies |
1% |
SICAV investment vehicles and others under specific conditions. |
Important note on the 23% rate:
Until 31 of December 2024, the companies with revenue lower than 1 million euros could apply a reduced rate of 23%.
However, from 1 January of 2025, this rate disappears and is being replaced by a new system of staggered rates for these entities:
- 21% for a tax base of up to €50,000
- 22% for the remainder of the tax base
The new rules will appy on a transitional basis because it will be progressively reduced in the coming years, down to rates of 17% and 20% in 2027, in order to apply tax measures proposed to boost microenterprises.
Then, apply the following formula to arrive at the Gross Payable Tax:
Gross Payable Tax = Tax Base x Tax Rate.
Rebates and deductions
These are other very important items because they help us pay less tax. So we can further reduce the amount of payable tax with the following sums if we meet the conditions:
- Deductions for job creation.
- Rebates for newly established entities.
- Investments in R&D or sustainable economy.
This resulting amount is the Net Payable Tax.
Calculation of corporation tax. Example
Once you clearly udnerstand all this, the formula for calculating corporation tax is much easier to grasp and calculate.
We'll do it in two steps.
Step 1: Calculation of the Gross Payable Tax:
Tax Base × Tax Rate = Gross Payable Tax.
Step 2: Calculation of the Net Payable Tax:
Gross Payable Tax – Deductions/Rebates = Net Payable Tax.
Let's take a simple example. Suppose we have a small company with the following figures in 2025:
- Annual income: €120,000.
- Deductible expenses: €60,000.
- Non-deductible expenses: €3000.
The calculation would be as follows:
Tax Base = €120,000 (income – €60,000 (deductible expenses) + €3,000 (non-deductible expenses) = €63,000.
Because it's a microenterprise, we apply first 21% and then 22% for the remainder when calculating the Gross Payable Tax:
Gross Payable Tax = (€50,000 X 21%) + (€13,000 X 22%) = €10,500 + €2,860 = €13,360.
Since it has no applicable deductions or rebates, the net tax will be the same as the payable tax:
Net Payable Tax = €13,360.
In short, the corporation tax owed by this company comes to €13,360 .
Note: For 2024 corporation tax, the rules for 2023 would still apply. So the rate of 23% should be applied, as follows:
Gross Payable Tax =63,000 x 23% = €14,490
As you can see, the difference in the change of the reduced rates is going to benefit the companies that are eligible for them.
Filing and paying the tax
Now comes the most delicate part of the tax: filing and payment. Because if you don't take this step, all the calculations you've made will have been to no avail.
You have to use two forms to file corporation tax:
- Form 200: this is the main form for filing corporation tax. You have to file it once a year, once you have in hand all the tax data of the closed financial year. It has to be filed between 1 and 25 July.
- Form 202: this is the form for paying instalments on account of corporation tax in the following year. You are thus advancing payment of corporation tax using estimated calculations. So when making the yearly tax return, you should only have to make an adjustment, instead of having to pay it all at once, if you've done things correcty. This is done three times a year:
- First payment: between 1 and 20 April.
- Second payment: between 1 and 20 October.
- Third payment: between 1 and 20 December.
Corporation tax is filed solely online, at the website of the Spanish tax agency. So you are going to have to set up your digital certificate, Cl@ve PIN or a similar method to gain access.
