The corporate tax rate is 25%. Newly established companies conducting business activities are taxed in the first tax period showing positive taxable base and the following tax year at a rate of 15% (with some exceptions). Branches of foreign companies taxed at same rate as domestic companies, in addition to 19% branch profits tax imposed on after-tax profits remitted to foreign head office. Branch profits tax does not apply to payments made to EU residents or where a tax treaty applies.
As of January 1, 2008, 50% of the gross income of Spanish domiciled companies derived from qualified Intellectual Property is exempt from Spain’s Corporation tax resulting in an effective tax rate of 15%.
Article 16 and 17 of the CITL include the general principles for dealing with transactions between related parties. The legislation provides that transactions between related entities and persons, including domestic as well as cross-border transactions, should be valued and declared at arm’s length. The rules and regulations are closely aligned with international best practices, as provided in the OECD Guidelines and the European Union Joint Transfer Pricing Forum (JTPF). The OECD TPG are recognized by the Preamble of the Corporate Income Tax Law as a source of interpretation of the internal legislation and as far as the Guidelines do not conflict with the domestic regulations.
Article 41 of the PITL establishes, as a general principle, that transactions between related persons or entities will be priced in accordance with the arm’s-length principle.