Learn about Corporate Income Tax in depth

Although the income tax campaign is still in its last throes, at Vasalto we are already thinking about what is to come. Next July is the deadline to pay the Inheritance Tax. Therefore, we wanted to dedicate a series of articles in our blog to better explain this tax. Next we are going to detail the most basic and important aspects of the IS: its characteristics, who has to pay it, how it is calculated and which are the models for its presentation.

Characteristics of the Corporate Income Tax

Corporate income tax is the tax levied on the income of companies and other legal entities located in Spain. To better understand the nature of the tax, it is best to look at its characteristics. We will classify it as a personal, direct and periodic tax.

It is personal because it takes into account personal circumstances. The taxable event, which is what is taxed, is the income obtained by legal entities, mainly commercial companies. There are also other types of taxes that are not related to these personal circumstances. An example of a real tax is the Real Estate Tax (IBI).

It is a direct tax because it is levied on the wealth itself. In this same classification we can find taxes such as Personal Income Tax (IRPF), which is levied on the acquisition of wealth by an individual. Other taxes such as VAT (Value Added Tax) tax the use of this wealth.

Finally, it is periodic because it is a tax liability that is generated over time. As the taxable event is prolonged in time, this tax is settled after the end of this period. The tax period for this tax is the fiscal year. This means that this year is taxed on the income obtained in the year 2023. On the other side we find the instantaneous taxes. These place their taxable event in specific acts. The Inheritance and Gift Tax can be an example of an instantaneous tax. Inheriting or donating are concrete acts, they are not prolonged in time, that is why their liquidation is instantaneous.

The taxpayers in the Corporate Income Tax

A taxpayer is any person, whether an individual or a legal entity, who is obliged to file a tax return. In the specific case of Corporate Income Tax, taxpayers will always be legal entities. In Spain there are many types of legal entities, but those that are liable for this tax are the following:

• Commercial companies: this is considered to be any legal entity that is created to initiate a commercial activity for profit. This classification includes Temporary Joint Ventures (UTE), as well as corporations and limited liability companies.
• Civil Companies that have a mercantile nature
• Investmentfunds, pension funds, cooperatives
• Agricultural companies and economic interest groupings (EIGs).
• Associations and foundations (NGOs, professional associations).

These companies are obliged to file the tax, even though no income has been obtained during the year. Nor does it exempt from filing in situations such as bankruptcy or liquidation of the company.

How the Corporate Income Tax is calculated

The first thing we have to know when calculating the Corporate Income Tax is the tax rate that corresponds to each company. There are six different percentages, which are going to be applied according to a series of circumstances:

• 25%. This is the general rate. If the company does not fit in any of the other assumptions, this rate is applied.

• 23%. This reduced rate is one of the novelties of this year for the Corporate Income Tax. It will be applied to entities with a turnover not exceeding one million euros in the previous tax period. The patrimonial entities are not eligible for this reduction.

• 20%. It is applied to those cooperatives that are tax protected.

• 15%. This reduction is established for newly created entities. They can benefit from this reduction in the first positive taxable base and the immediately following one. If the period following the first positive base is not positive, the reduction will not be effective.

• 10%. This tax is for legal entities that are not for profit, such as NGOs.

• 1%. In this last case are the investment companies of variable capital regulated by Law 35/2003.

Once the corresponding tax rate is known, it is time to calculate the tax. Now we have to know the accounting result, which is nothing more than the result of subtracting the expenses from the income of a company.

A series of reductions can be applied to this accounting result to obtain the taxable base. These reductions, such as the offsetting of tax losses, are specified in Chapter V of the Corporate Income Tax Law (LIS).

Once the relevant reductions have been made, the gross tax liability is calculated by applying the tax rate.

Corporate income tax filing forms

The most important forms relating to Corporate Income Tax are as follows:

• Form 200: This is the form used by most companies. They are those whose fiscal year coincides with the calendar year. These entities must file this form between July 1 and July 25 of the year following the year in which the tax period ends.

• Form 202: This is the form used for payments on account, which are amounts that are advanced before the payment of a debt. This form is to be filed in the first 20 calendar days of the months of April, October and December.

• Finally, we have Form 220. This form is the one established for entities under the tax consolidation regime. This regime is regulated by the Corporate Income Tax Law, specifically in its chapter VI, which includes articles 55 to 75. The filing period for this form is, as a general rule, the first 25 calendar days of July of the year following the end of the tax period.

Your taxes made easier with Vasalto

At Vasalto, we have been helping companies with a comprehensive service for more than 30 years. We offer both payroll outsourcing services and accounting advice. During these years we have worked hand in hand with a large number of clients who are leaders in their respective sectors, which gives us a great deal of experience in the sector.

We are present in several countries, with headquarters in Madrid, Barcelona, Porto and Bordeaux, and we have clients all over the world, as well as collaborators in more than fifty countries. Moreover, Vasalto is a purely technological company. We believe in putting technology at the service of talent. That is why we have a series of proprietary computer systems that allow us to manage more than 35,000 payrolls every month and automate most of our clients’ accounting procedures.

Thanks to Valanza, Vasalto’s legal firm, we also have a team of lawyers specialized in the areas of commercial, civil, labor and administrative law, among others. We count on them to provide the best legal assistance possible, always working towards comprehensive service.

If you are interested in learning more about payroll outsourcing, at Vasalto we will be happy to assist you. Contact us to get to know us and see how we can help your company.