The tax system in Spain is a determining factor in the operability and profitability of small and medium-sized enterprises (SMEs). Understanding the different applicable tax systems and their financial impact is essential for efficient management and compliance with tax obligations. At Gutiérrez Pujadas & Partners, we advise SMEs on how to optimise their taxation and comply with current regulations.
Classification of SMEs in Spain
In Spain, SMEs are defined according to Recommendation 2003/361/EC of the European Commission, based on the number of employees and the turnover or balance sheet total:
- Microenterprise: Fewer than 10 employees and annual turnover or balance sheet total of less than 2 million euros.
- Small company: Fewer than 50 employees and a turnover or annual balance sheet total of less than 10 million euros.
- Medium-sized company: Fewer than 250 employees and a turnover not exceeding 50 million euros or an annual balance sheet total of less than 43 million euros.
Main taxes affecting SMEs
1. Corporation tax (IS)
Corporation tax is levied on the profits of legal entities in Spain. The general rate is 25%, although from 2023 it has been reduced to 23% for SMEs with a turnover of less than 1 million euros.
Tax benefits for SMEs in corporation tax:
- Freedom of amortisation: Free amortisation of new tangible fixed assets if the workforce is maintained for two years.
- Accelerated amortisation: Application of the amortisation coefficient multiplied by 2 to fixed assets.
- Tax deductions: Profits from R&D&I, job creation or investment in fixed assets.
2. Value Added Tax (VAT)
VAT is an indirect tax on consumption and affects SMEs as tax collectors. There are three tax rates:
- Standard rate: 21%
- Reduced rate: 10% (food, transport, hotels, etc.)
- Super-reduced rate: 4% (basic necessities such as bread or milk)
Special regime for SMEs:
SMEs can apply the cash accounting criterion, which allows them to settle VAT only when the invoice is collected, avoiding tax advances on unpaid invoices.
3. Personal Income Tax (IRPF)
For the self-employed and sole traders, personal income tax is applied according to net income, with a progressive rate of 19% to 47%.
Personal income tax estimation schemes:
- Standard Direct Estimation: For businesses with income over €600,000.
- Simplified Direct Assessment: With income less than €600,000.
- Objective Assessment (Modules): Based on parameters such as the size of the premises or the number of employees.
Impact of the Tax System on SMEs
Tax Burden and Profitability
An inappropriate system can increase taxes and reduce profits. Efficient tax planning helps optimise costs.
Administrative Simplification
The module system reduces the administrative burden, while direct estimation requires more accounting control.
Financial Planning
Knowing the tax obligations helps to avoid cash flow tensions and to plan strategic investments.
Access to Tax Incentives
SMEs can benefit from deductions in corporate tax and personal income tax for investments in R&D, employment and sustainability.
Tax Support Measures for SMEs
- Reduction of corporation tax to 23% for SMEs with revenues of less than €1M.
- Deferrals and instalments for taxes such as VAT and corporation tax.
- Tax deductions for hiring and training.
- Cash accounting for VAT to improve liquidity.
Tips for optimising SME taxation
- Choose the right tax regime according to turnover and activity.
- Take advantage of tax incentives to reduce the tax burden.
- Plan tax payments to avoid penalties.
- Seek advice from experts such as Gutiérrez Pujadas & Partners, who specialise in SME taxation.
The tax system directly affects the profitability and competitiveness of SMEs in Spain. With a well-planned tax strategy, companies can optimise their taxation, improve their liquidity and reduce unnecessary costs.
At Gutiérrez Pujadas & Partners, we offer expert advice to help your SME comply with tax regulations and pay only the taxes it needs to. Contact us and optimise your company’s tax situation today.