Corporation Tax in Spain for Foreign-Owned Companies

Corporation tax in Spain for foreign companies involves more than applying the applicable Spanish corporate income tax rate. For foreign investors, multinational groups, and overseas parent companies, the tax treatment depends on whether business is conducted through a Spanish subsidiary, branch office, or another non-resident structure, together with the company's tax residence and the resulting compliance obligations. These distinctions influence how taxable profits are calculated, which reliefs and exemptions are available, and how tax is reported to the Spanish tax authorities (AEAT).

Two Tax Regimes: Resident vs Non-Resident Companies

Foreign-owned companies are not all taxed the same way in Spain. Instead, two distinct corporate tax regimes apply depending on tax residency rather than ownership. 

Spanish-Resident Companies (IS Regime)

A company is a Spanish tax resident if it is incorporated under Spanish law, has its registered office in Spain, or has its place of effective management in Spain. It is subject to resident corporation tax (Impuesto sobre Sociedades – IS) on worldwide income, with relief for double taxation. It is administered by the Agencia Tributaria and may benefit from tax credits, deductions, and incentives. Most foreign-owned subsidiaries incorporated in Spain fall under this regime.

Non-Resident Companies (IRNR Regime)

A foreign-owned company that does not meet the criteria for Spanish tax residency but earns income from sources within Spain is subject to the non-resident income tax Spain (Impuesto sobre la Renta de no Residentes – IRNR) regime and is divided into two sub-regimes: without PE vs with PE.

Without a Permanent Establishment

If foreign-owned companies earn Spanish-source income without operating through a permanent establishment, they are taxed on a gross income basis under the IRNR regime without PE. 

In this case, no business expense deductions are generally permitted. Moreover, each type of income (e.g., dividends, interest, or capital gains on real estate) is filed separately, usually using Modelo 210, to the Agencia Tributaria. 

With a Permanent Establishment 

If foreign-owned companies earn Spanish-source income while operating through a permanent establishment under Agencia Tributaria regulations, they fall under the IRNR regime with PE.

In this case, allowable business expense deductions are permitted, and income is reported through the PE rather than by separate filings for each income type.

How Permanent Establishments Affect Corporation Tax in Spain for Foreign-Owned Companies?

A permanent establishment in Spain is the threshold concept. Crossing it shifts a non-resident company from IRNR without a PE (gross basis, no deductions, no loss offset) to IRNR with a PE (net basis, deductions available, losses offsettable).

When Do Foreign-Owned Companies Create Permanent Establishments in Spain?

For corporation tax in Spain for foreign companies, a permanent establishment generally arises:

• Where a non-resident company carries on business through a fixed place of business in Spain, such as an office, branch, factory, workshop, warehouse, or other permanent business location.
• Where a dependent agent habitually concludes contracts on behalf of the foreign company.
• Where a construction or installation project lasts more than six months under Spanish domestic law, although many double tax treaties apply a 12-month threshold instead.
• Where regular business activities are carried out by employees based in Spain, even if the company has no formal office.

However, tax treaties may limit Spain's ability to assert PE, as the relevant bilateral treaty always takes precedence.

Is a Spanish Subsidiary of a Foreign-Owned Company Subject to Corporation Tax in Spain on Its Worldwide Income?

Yes. When comparing a Spanish subsidiary vs branch in Spain, a Spanish branch office generally falls under the IRNR regime with PE and is taxed only on income attributable to its Spanish permanent establishment, whereas a Spanish subsidiary falls under the IS regime and is taxed on its worldwide income, regardless of where its foreign parent is established.

Corporation Tax Rates in Spain For Resident Companies: IS Rate Spain 2026

General Rate (25%)

The Spanish corporate income tax rate for resident companies (IS regime rate) is 25% on their worldwide taxable profits.

Certain smaller companies may also qualify for a reduced 23% rate where their annual turnover is below €1 million, subject to the applicable conditions.

Newly Formed Company Rate (15%)

Newly incorporated companies may benefit from a reduced 15% Spanish corporate income tax rate. The reduced rate applies only to the first tax period in which the company reports a positive taxable base (taxable profit) and the immediately following tax period, provided the company satisfies the statutory eligibility requirements.

ZEC Canary Islands Corporate Tax Rate (4%)

The Canary Islands Special Zone (ZEC) is one of the European Union's most attractive tax regimes. Its principal benefit is a 4% Spanish corporate income tax rate available to qualifying companies, making it an attractive option for international investors, entrepreneurs, and family offices establishing operations in the Canary Islands. However, requirements vary based on the island:

Gran Canaria & Tenerife

Minimum of 5 jobs created and a minimum initial investment of €100,000.

Other Islands (La Palma, La Gomera, El Hierro, Fuerteventura, and Lanzarote):

Minimum of 3 jobs created and a minimum initial investment of €50,000.

Corporation Tax Rates In Spain For Foreign Companies: IRNR Rate Spain 2026

Foreign-Owned Companies Without a PE (24% / 19%)

The Non-Resident Income Tax (IRNR) rate for non-resident companies without a permanent establishment is generally 24% on Spanish-source income or 19% for companies resident in another EU or EEA member state. Tax is calculated on a gross income basis.

Foreign-Owned Companies Operating Through a Permanent Establishment (25%)

The IRNR rate for non-resident companies operating through a PE is generally 25% (similar to the IS regime) on the net profits attributable to the permanent establishment. However, Double Tax Treaties (DTTs) signed by Spain can significantly modify this taxation, such as by lowering tax rates, adjusting how profits are calculated, or restricting the definition of a permanent establishment

Calculating the Taxable Base

For companies subject to the Impuesto sobre Sociedades (IS) regime, the taxable base is calculated from the accounting profit prepared in accordance with Spanish GAAP (PGC), after applying the tax adjustments required under the Corporate Income Tax Law (Ley del Impuesto sobre Sociedades). 

Deductible Expenses (ordinary deductions)

Ordinary business expenses are generally deductible from your revenue when calculating the taxable base. These include

• Operating and overhead costs
• Salaries, wages, and employee benefits
• Statutory depreciation
• Financial costs (such as interest on loans)

To prevent base erosion, Spain applies a fixed ratio rule under which net interest expense is generally deductible in full up to €1 million. Any amount exceeding €1 million is generally deductible only up to 30% of EBITDA, subject to the applicable statutory rules.

Non-Deductible Expenses (items that require a tax adjustment)

Certain expenses are not deductible for corporation tax purposes and must therefore be added back when calculating the taxable base. These generally include fines and criminal penalties, charitable donations exceeding the applicable statutory limits, and certain related-party payments.

Participation Exemption Spain (a tax relief that reduces the taxable base).

One of the principal features of the Spanish corporate tax regime is the 95% participation exemption (exención por participación) for qualifying dividends and capital gains received from qualifying subsidiaries.

Under Article 21 of the Corporate Income Tax Law, the exemption generally applies where the company holds at least a 5% shareholding (or an acquisition cost exceeding €20 million) for a minimum of 12 months, and the subsidiary is subject to a nominal corporate tax rate of at least 10%.

Loss Carryforwards

Tax losses may generally be carried forward indefinitely and offset against future taxable profits. However, in any tax year, the amount that may be offset is generally limited to 70% of the positive taxable base, subject to a minimum annual allowance of €1 million.

Example: Calculating the Taxable Base

Suppose a Spanish company reports an accounting profit of €100,000 for the year. During the tax calculation, it identifies €5,000 of non-deductible expenses, which must be added back because they are not deductible for corporation tax purposes. The company also receives €20,000 in dividends from a qualifying subsidiary. As the participation exemption applies, 95% (€19,000) of those dividends is exempt from corporation tax.

The taxable base is therefore calculated as follows:

• Accounting profit: €100,000
• Add: Non-deductible expenses: €5,000
• Less: Participation exemption: €19,000
• Positive taxable base: €86,000

Assuming the company has sufficient tax losses carried forward, it may offset up to 70% of €86,000 (€60,200). This leaves a final taxable base of €25,800, to which the applicable corporation tax rate is applied.

Can Tax Losses Be Offset Across a Foreign-Owned Corporate Group in Spain?

Yes. Tax consolidation in Spain (Régimen de Consolidación Fiscal) allows qualifying foreign corporate groups to file a joint Corporate Income Tax (IS) return, treating the group as a single tax unit. The algebraic sum of individual profits and losses allows losses in one group company to offset profits in another immediately, while internal intra-group transactions are eliminated.

Filing Obligations and Payment Calendar

For Companies Subject to the IS Regime

Spanish-resident companies, including foreign-owned subsidiaries subject to the Impuesto sobre Sociedades (IS) regime, must comply with the following filing obligations and payment deadlines.

Spanish Corporate Income Tax Annual Returns

Companies must file Form 200 (Modelo 200) within 25 calendar days following the six months after the end of the fiscal year. For companies with a 31 December year-end, the filing period generally runs from 1 July to 25 July of the following year. If the deadline falls on a non-working day, it is extended to the next business day. Returns must be submitted electronically through the Agencia Tributaria (AEAT) using an accredited digital certificate.

Spanish Corporate Income Tax Advance Payments (Pagos a Cuenta)

Spanish Corporate Income Tax (IS) requires advance split payments (pagos fraccionados) on account of the final annual tax return. Companies file Form 202, while groups under fiscal consolidation submit Form 222. Deadlines for both fall within the first 20 calendar days of April, October, and December.

Companies with turnover below €6 million

Each advance payment is generally 18% of the previous year's corporation tax liability.

Companies with turnover above €6 million

Advance payments are generally calculated as 17% of the current year's taxable income rather than the previous year's tax liability.

Corporate groups with turnover exceeding €10 million

Advance payments are generally calculated as 24% of the current year's taxable income under the rules applicable to large corporate groups.

For Foreign-Owned Companies Subject to the IRNR Regime

Non-resident companies without a PE must declare Spanish-sourced income (like royalties, dividends, or property) using Form 210 (Model 210). The form must be submitted electronically via the Agencia Tributaria Non-Resident Platform. Deadlines and procedures vary based on the specific type of income. For most income types, it must be filed generally within 1 month from the date of income receipt.

Withholding Tax in Spain on Payments to Foreign-Owned Parent Companies

As part of the broader corporation tax framework for foreign-owned companies, Spain generally imposes withholding tax at 19% for EU/EEA parent companies and 24% for other non-resident parent companies on dividends, interest, royalties, management fees, and other Spanish-source payments. The applicable rate depends on the type of income, whether the recipient is resident in the EU/EEA, and whether a double tax treaty applies.

EU Directives

Under the EU Parent-Subsidiary Directive, qualifying EU/EEA corporate groups can reduce the standard 19% Spanish withholding tax on cross-border dividends to 0%. To qualify for the zero-rate, the parent company must hold a minimum 5% stake for at least one uninterrupted year and meet specific substance requirements to prevent treaty abuse.

Similarly, interest and royalties between associated EU companies can also be tax-exempt under the EU Interest and Royalties Directive.

Double Taxation Treaty Spain (DTT)

Spain also has an extensive network of more than 90 double tax treaties, including agreements with the United States, United Kingdom, Germany, France, and the Netherlands. These treaties can further reduce Spanish withholding tax, with dividend withholding commonly reduced to 5% or 10% and interest or royalty withholding often reduced to 0%, depending on the applicable treaty. To claim treaty benefits, the foreign parent company must generally provide a valid Certificate of Tax Residence issued by its home tax authority and satisfy the relevant treaty conditions.

Corporation Tax in Spain for Foreign Companies and Compliance Rules

Transfer pricing, anti-avoidance (CFC), and the global minimum tax form a vital compliance layer above the basic corporation tax in Spain for foreign companies. Rather than just applying to large multinationals, these rules govern specific intercompany transactions and global structures for any corporate group.

Transfer pricing Spain

Spain operates a strict regulatory environment heavily aligned with the OECD Transfer Pricing Guidelines.

• All related-party transactions must be at arm's length. 
• Full documentation, including the Master File and Local File, is required where related-party transactions exceed €250,000 per related entity per year. For transactions with entities in tax havens, no threshold applies, and documentation is required immediately.
• Groups with global revenue above €750 million must file Country-by-Country Reports with the Agencia Estatal de Administración Tributaria (AEAT).
• Taxpayers must report related-party transactions and specific intercompany operations to AEAT using Form 232 in Spain alongside their corporation tax returns.

Controlled Foreign Corporation (CFC) Rules Spain

Spanish resident companies that control 50% or more of a foreign entity must review the foreign entity's tax profile. If the foreign entity earns passive income in a low-tax jurisdiction, defined as an effective tax rate below 75% of Spain's 25% corporate income tax rate (i.e., below an 18.75% nominal rate), that passive income must be attributed directly to the Spanish parent's taxable base. However, EU subsidiaries with genuine economic substance are generally exempt.

Pillar Two Spain 

Spain’s complementary top-up tax (Impuesto Complementario) implements the OECD’s Pillar Two framework into domestic law via Law 7/2024, which applies to fiscal years starting on or after January 1, 2024. The rules impact Multinational Enterprise (MNE) groups (both domestic and international) with global consolidated revenues exceeding €750M in at least two of the four preceding fiscal years. This ensures that large corporate groups meet an effective minimum tax rate of 15% on profits generated in Spain.

If the standard corporation tax in Spain effectively falls below 15% due to deductions and exemptions, a top-up tax is applied. Foreign groups with Spanish subsidiaries must explicitly assess whether the Spanish entity's local effective tax rate hits the 15% floor to manage any additional, unexpected tax exposure.

Opening a Business Account for a Foreign-Owned Companies

To comply with Agencia Tributaria requirements related to corporation tax in Spain, foreign companies must open a Spanish business account using their Spanish Tax Identification Number (NIF) and incorporation documents. However, non-resident directors and complex ownership structures often lead to additional due diligence or delays at traditional banks such as Santander, BBVA, and CaixaBank. Digital banks such as N26, Revolut, and Qonto may accept the Spanish entity but often struggle with non-resident directors or layered ownership. 

Specialist providers such as Banq Global, built for cross-border structures, accept non-resident directors and shareholders from over 190 countries, offer fully online onboarding, and provide a local Spanish IBAN with access to SEPA payment rails, helping businesses manage corporation tax payments and other cross-border financial obligations more efficiently.

FAQs

What is the difference between IS and IRNR in Spain?

The primary distinction between the IS and IRNR in Spain lies in tax residency. The IS taxes resident companies on global income with full deductions, whereas the IRNR taxes non-resident entities on Spanish-source income only. Without a permanent establishment, IRNR is levied on gross income with no deductions and filed per income type on Form 210. 

Can a Spanish company claim a corporation tax exemption on dividends from foreign subsidiaries?

In most cases, yes. The Spanish participation exemption (exención participación) shields qualifying dividends and capital gains from double taxation. Under this regime, 95% of the distributed income is exempt from corporate income tax in Spain. The remaining 5% is treated as a non-deductible management expense and is taxed at the standard corporate income tax rate of 25%, resulting in a minimal effective tax rate of 1.25%.

Can a company with non-resident directors open a business account in Spain?

Yes. Opening a business account helps foreign companies comply with the corporation tax requirements in Spain, although traditional Spanish banks may require in-person visits where directors are non-resident. In contrast, specialist business account providers such as Banq Global, designed for cross-border structures, accept non-resident directors and shareholders from 190+ countries, with fully online onboarding and a local Spanish IBAN.

What documents do foreign-owned companies need to open a business account?

To open a business account, foreign-owned companies must provide a certificate of incorporation, constitutional documents (Estatutos Sociales), a notarial deed of incorporation, a tax identification number (NIF), and proof of a physical registered address in Spain. Where the ownership chain involves multiple entities, providers may require identification documents at each level. Banq Global's onboarding is structured for these layered structures and includes a dedicated account manager throughout the process.

How long does it take to open a business account for foreign-owned companies?

Traditional Spanish banks typically take 4–8 weeks for non-resident or international structures, and some may decline applications outright where there is no local director. Specialist providers with digital-first onboarding can process applications significantly faster. For example, Banq Global targets 24-hour approval for qualifying applications, with the full timeline dependent on document completeness and ownership complexity.

Are there ongoing compliance obligations beyond the annual IS return?

Yes. Spanish-resident companies must submit three advance tax payments per year (April, October, December), file VAT returns (monthly or quarterly), manage payroll taxes where employees are on Spanish contracts, comply with transfer pricing documentation requirements for related-party transactions above €250,000, and file statutory accounts (cuentas anuales) with the Mercantile Registry annually. Foreign-owned companies with a PE have analogous corporation tax obligations in Spain. Groups above €750M global revenue also have CbCR obligations with AEAT.

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