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Tax Measures to Attract Investment in Spain

21 Jan 2011

December saw the publication of new measures on tax, employment and deregulation measures to promote investment and the creation of employment, which approves some important measures. Taxand Spain highlights the latest tax modifications being enforced within Spain and how this benefits foreign investors.

The Spanish Government passed this piece of legislation in an effort to leave the current economic downturn completely behind, and aiming to eliminate obstacles to the creation, capitalisation and survival of all kinds of companies.

The main tax measures it contains are:

a) Capital duty exemptions

On 3 December 2010, the following types of transactions will be exempt from capital duty:

  • Formation of companies
  • Capital increases
  • Contributions made by shareholders that do not cause a capital increase
  • Relocation to Spain of the place of effective management or the registered office of a company, where neither one nor the other had been previously located in an EU Member State

b) Unrestricted depreciation for new assets

In tax periods commencing on or after 1 January 2011, taxpayers will be free to use unrestricted depreciation rates for investments in new tangible fixed assets and real estate used in business activities, made available to the taxpayer in the tax periods commencing 2011 to 2015. They will not need the recognition on the statement of income or fulfilment of maintenance of employment requirements. This also applies to investments made using finance lease agreements that meet certain conditions.

Investments that have been depreciated using the unrestricted depreciation method requiring the maintenance of employment (method in force up to now) must fulfil the requirements in force when the investments were made.

c) Measures to stimulate small- and medium-size enterprises

The new legislation raises the threshold on net sales which cannot be exceeded by enterprises wishing to qualify for the small enterprises special CIT regime, from EUR8 million to EUR10 million. Enterprises are also allowed to continue applying the special provisions for which they qualify for the three years immediately following the year in which their net sales reach the EUR10 million threshold.

This will mean that many more enterprises (those that have annual net sales of less than EUR10 million) will be taxed at the reduced rate of 25%, as from this reform, on the first EUR300,000 (prior to the reform EUR120,000). This EUR300,000 tranche is equally applicable to enterprises entitled to apply the reduced rate of 20% (net sales of less than EUR5 million, average workforce of less than 25 employees and job preservation).

Taxand's Take

This measure intends to eliminate the obstacles in the creation, capitalisation and maintenance of all kinds of enterprises and helps to strengthen the capital structure of many Spanish subsidiaries. This may even boost the Spanish economy through the potential creation of new enterprises.

Your Taxand contacts for further queries are:
Vicente Bootello
T. +34 91 514 5200

Jos? Ignacio Ripoll
T. +34 91 514 5200

Taxand's Take Author