Executive Summary
The Kingdom of Spain is located in the South-Western part of Europe on the Iberian Peninsula, bordering with Portugal, France, Andorra, Gibraltar, Bay of Biscay, as well as the Mediterranean Sea and the Atlantic Ocean. It covers a total area of 504,030 sq km. It is the second largest country of the European Union after France, and its territory also comprises the Balearic Islands, the Canary Islands and two autonomous cities of North Africa – Ceuta and Melilla. Madrid is the Capital of Spain, Spanish is its official language, though a number or local languages and dialects are recognized regional languages.

Spain is a democratic country which is a constitutional monarchy with a hereditary monarch. Legislative power belongs to a bicameral parliament, executive power is in the hands of the Council of Ministers which is headed by the President of Government. Spain is the member state of a number of international organizations, such as the European Union, NATO, OECD and others, and it is one of the most developed countries of the world.

Spain was one of the most rapidly developing countries of the EU in recent years. It has significantly increased its GDP per capita and lowered unemployment, having become a country of destination for many immigrants. Black economy and high inflation are defined as Spain’s weakest economic points. Tourism and construction industry have been experiencing a rapid growth during the recent years. However, the country has suffered significantly from the global economic crisis of the end of 2008.

The Euro is the currency used on the territory of Spain.

Spain has a picturesque landscape to which mountain ranges changed by spacious plains along the coast are characteristic. A number of small and big rivers run through the territory of the country. It has a diversified wildlife and rich vegetation.

Due to a diversified territory, different zones of the country have different climates. Distance from the mountains, sea and ocean plays a determinant role in local weather conditions. Such climates as continental Mediterranean, Mediterranean, Oceanic, Semi-arid and Subtropical can be distinguished on the mainland of Spain.

Map, Flag and Coat of Arm


Types of Company

Even though the Canary Islands are a part of Spain and thus of the European Union, certain companies constituted there enjoy a number of fiscal benefits and other incentives. Please see the “Canary Islands” jurisdiction for major information.

Co-ordination centre
It is possible to establish a company’s headquarters in the Basque and Navarre regions of Spain, as a co-ordination centre. Such centres take part in a company’s management, administration, coordination and supervision. They may be liable to pay corporation tax at a discounted rate. In order to become a co-ordination centre, a company must fulfill the following requirements: it must be a part of a multinational corporation; at least 25% of the corporation’s shares must belong to non-residents; at least 25% of the corporation’s turnover must be generated by foreign members; share capital and annual turnover must exceed a certain amount; at least 8 employees must be employed by this type of company.

Holding Company (Entidad de Tenecia de Valores Extranjeros (ETVE)
This type of company is liable to pay corporation tax at a standard rate, but may be exempted from taxation of foreign dividends and capital gains. This makes Spain one of the European countries, attractive for establishing and managing a holding company.

Venture Capital Fund
Structured and administered in a certain way, this type of company may be granted attractive fiscal incentives, such as exemption from corporation tax on dividend income remitted by target corporate entities; in addition, outgoing dividends to shareholders are exempted from withholding tax; significant incentives may be granted for capital gains tax purposes.

Taxation year in Spain coincides with a calendar year, which start on 1st January and ends on 31st December.

A resident of Spain is a person who spends in Spain at least 183 days in a tax year and has his main financial interest there. Residents are liable to pay taxes on their world-wide income, non-residents pay taxes on income derived from activities conducted in Spain.

Income tax has a scalable nature and is charged at varying rates from 24% to 43% above the allowances. These rates include national and provincial taxes. A VAT or a transfer tax is payable on a purchase of a property. VAT, stamp duty, wealth tax, local property tax and land appreciation tax are levied at varying rates. 18% for the capital gains tax purposes may be levied on a sale of a property. Inheritance and gift taxes are levied at varying rates depending on the value of assets and other factors.

Standard rate of corporation tax is levied at a rate of 30%. The standard rate of VAT is 16%, reduced rates of 7% and 4% are added to certain goods and services. VAT does not exist in the Canary Islands, Melilla and Ceuta.

Withholding and capital gains taxes rates may be levied and must be addressed on the individual basis. It may be advantageous to incorporate a company in the Canary Islands for achieving significant fiscal incentives.

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