Small Business Tax in Spain

What taxes does a Spanish small business actually pay?

Every business active in Spain faces at minimum two recurring tax obligations: a tax on profits and a consumption tax on sales. The profit tax depends on legal structure. An incorporated company (Sociedad Limitada or Sociedad Anonima) is subject to the Impuesto sobre Sociedades (IS), a corporate income tax under Ley 27/2014 (Ley del Impuesto sobre Sociedades, LIS). A self-employed individual operating as an autonomo is instead subject to the Impuesto sobre la Renta de las Personas Fisicas (IRPF) on their business income. Both structures face IVA (Impuesto sobre el Valor Anadido, Spain's VAT) on taxable supplies of goods and services. The choice of structure is therefore a consequential one: incorporated entities pay a flat-rate corporate tax while autonomos face a progressive personal income tax. A qualified Asesor Fiscal can model both scenarios before registration [C1, C2].

How does Spain's Impuesto sobre Sociedades work for small companies?

For tax periods beginning on or after 1 January 2025, the IS rate schedule distinguishes four tiers based on company size and age [C1]:

The general rate (tipo general) is 25%, applicable to most resident companies and permanent establishments.

Companies classified as entidades de reducida dimension (ERD) -- those whose net turnover (importe neto de la cifra de negocios) in the immediately preceding tax period was under EUR 10 million -- pay a transitional reduced rate of 23% for 2025 on their first EUR 1 million of taxable profit, with the standard 25% applying above that threshold. A 2023 reform extended ERD eligibility significantly, and the EUR 1 million profit band eligible for the reduced rate replaced the former EUR 300,000 cap.

Micro-enterprises (companies with net turnover under EUR 1 million in the prior period) benefit from a two-bracket transitional structure for 2025: 21% on the first EUR 50,000 of taxable income and 22% on the remainder. These transitional rates are scheduled to decrease further in 2026 and converge on lower permanent rates by 2028 as part of Spain's phased SME tax reform [C1].

Newly created entities (entidades de nueva creacion) applying genuinely for the first time to economic activity in Spain pay 15% in the first tax period where taxable income is positive and in the immediately following period. Anti-recycling rules under Article 29 LIS exclude successor businesses and holding-company structures from qualifying. After the two-year window the applicable rate reverts to whichever standard tier the entity falls into based on its turnover [C1].

The annual IS return is filed on Modelo 200 via the AEAT electronic portal, with a deadline of 25 July for companies with a 31 December year-end (the predominant Spanish fiscal year). Advance instalments are handled separately via Modelo 202 (see below).

What rate does a Spanish autonomo pay under IRPF?

An autonomo (self-employed individual) registered with the AEAT does not pay IS. Instead, net income from economic activity flows into their annual IRPF return and is taxed on the same progressive scale as employment income. The 2025 state-level brackets are [C2]:

Spain operates a split-rate system: each autonomous community (comunidad autonoma) levies its own additional IRPF scale on top of the state rates above. Total marginal rates therefore vary by region. An autonomo in Madrid typically faces a lower combined rate than one in Catalonia or Andalucia at the same income level.

Autonomos also pay social security contributions (cuota de autonomo) through a bracket system based on projected net monthly profit, with 15 income brackets ranging from roughly EUR 200 per month (lowest bracket) to EUR 590 per month (highest bracket) for 2025. Contributions are compulsory from day one of registration.

Autonomos making quarterly IRPF advance payments use Modelo 130 (not Modelo 202, which is for companies): 20% of cumulative net profit for the year to date, filed by 20 April, 20 July, 20 October, and 30 January [C2].

What are the two IRPF income-calculation methods for autonomos?

Once registered as an autonomo, the AEAT offers two methods to calculate net business income for IRPF [C3]:

Estimacion directa (direct estimation) tracks actual income and deductible expenses using invoices and accounting records. Simplified direct estimation (estimacion directa simplificada) is available to autonomos whose prior-year turnover did not exceed EUR 600,000. Full direct estimation applies above that. Under both, real revenue minus real allowable expenses equals taxable net profit. This method is always available and captures the actual economic result of the business.

Estimacion objetiva (modulos, objective estimation) is an optional simplified regime available only to autonomos whose activities appear on the AEAT's approved list and whose prior-year turnover from non-agricultural activities does not exceed EUR 250,000 (a temporarily expanded threshold applying through 2026, up from the permanent EUR 150,000 cap). Instead of tracking real revenues and expenses, income is estimated from objective parameters specific to each activity type -- staff headcount, floor area, vehicle capacity, kilowatts of installed power, and similar measures. For 2025 the AEAT Order maintained a general 5% reduction on the modulos-derived net profit figure, reducing the tax base further. The modulos regime simplifies compliance substantially but may overstate or understate actual profit depending on the business. Autonomos can renounce the modulos method (by filing the first Modelo 131 quarterly advance under direct estimation) but cannot re-enter for three years [C3].

The choice of method is consequential: high-margin businesses often pay less under modulos; high-turnover low-margin businesses often do better under direct estimation. The wrong choice can mean overpaying for years. A qualified Asesor Fiscal should model both scenarios at registration.

How does IVA work for Spanish small businesses?

All Spanish businesses -- whether incorporated or operating as autonomos -- that make taxable supplies of goods or services within Spain must charge IVA on their sales and remit the net amount to the AEAT quarterly via Modelo 303 [C4]. There is no turnover threshold below which registration is optional (unlike the UK VAT registration threshold, for example).

The standard IVA rate (tipo general) is 21% and applies to most commercial goods and services. Reduced rates of 10% (tipo reducido, covering food products, public transport, and certain services) and 4% (tipo superreducido, covering basic foodstuffs, medicines, and books) apply to specific categories. The quarterly filing deadlines are:

• Q1: 1-20 April
• Q2: 1-20 July
• Q3: 1-20 October
• Q4: 1-30 January

The net amount due each quarter equals IVA charged on sales (IVA repercutido) minus IVA paid on business purchases and expenses (IVA soportado). Businesses in a net refund position for Q1-Q3 typically carry the credit forward; Q4 returns can request a cash refund. An annual summary on Modelo 390 consolidates the four quarterly returns [C4].

Businesses registered for IVA must issue compliant facturas (invoices) to customers and retain supporting invoices for expenses. Electronic invoicing (facturacion electronica) obligations are expanding in Spain under the ongoing Verifactu regulation.

What are pagos fraccionados and who must file Modelo 202?

Companies subject to IS must make three advance instalment payments (pagos fraccionados) during the year using Modelo 202, filed electronically via the AEAT's electronic office [C5]. Deadlines for each instalment are the first 20 calendar days of April, October, and December (or the first 15 days for direct-debit payments).

The default calculation method (Article 40.2 LIS) applies 18% to the IS liability shown on the most recent Modelo 200 annual return. Companies with prior-year turnover exceeding EUR 6 million are required to use the current-period method (Article 40.3 LIS), which applies a percentage to the taxable base calculated from accounts for the period to date. The instalment percentages under Article 40.3 are set annually by the tax authorities and generally fall in the 17-24% range depending on company size and type. Companies that had zero taxable income in the prior year are not required to file if using the Article 40.2 method, but must still file if turnover exceeded EUR 6 million regardless [C5].

What is the recargo de equivalencia and who does it affect?

The recargo de equivalencia is a special IVA regime that applies to retail merchants who are individual persons (or entities in IRPF attribution regime) selling moveable goods to final consumers without subjecting those goods to manufacturing or significant processing, provided that over 80% of prior-year sales were to end consumers [C4].

Under this regime, the retailer does not file quarterly Modelo 303 returns for their retail activity. Instead, their suppliers charge them a combined amount: the applicable IVA rate plus an additional surcharge shown separately on the invoice. For 2025 the surcharge rates are:

• 21% IVA items: 5.2% recargo
• 10% IVA items: 1.4% recargo
• 4% IVA items: 0.5% recargo

The surcharge fully discharges the retailer's IVA obligation on purchases for resale: they collect and remit no IVA to the AEAT on those sales. The trade-off is that they cannot recover IVA paid on business inputs. For small retailers with limited input IVA to recover, this simplification can be administratively valuable. For retailers with significant input IVA (major capital purchases, for example), the inability to deduct may make the regime costly. Certain categories of goods are excluded from the recargo de equivalencia entirely, including motor vehicles, jewellery, antiques, and industrial machinery [C4].

Small businesses operating across the Spain country overview may encounter this regime as a default obligation rather than an election -- retail merchants meeting the definition are required to apply it and cannot opt out. A qualified Asesor Fiscal registered with the REAF (Registro de Economistas Asesores Fiscales) or AEDAF (Asociacion Espanola de Asesores Fiscales) can confirm whether a specific retail activity falls within the scope of the regime and model the cost compared to the general IVA regime.

The information on this page is a neutral summary of current Spanish tax rules sourced from official AEAT publications and is not a substitute for personalised guidance from a qualified tax professional familiar with the specific facts of your business.