Tax regimes: France vs. Spain

If you're planning to set up a business in Spain, the good news is that, overall, corporate taxation is lower than in France! But to take advantage of this rather favorable tax system, you need to understand how it works. At first glance, the French and Spanish tax systems may seem similar, but there are some notable differences. It's vital to be aware of them, and to take them into account, not only when setting up your business, but also in your day-to-day management. At Iter Advisors, we help you take stock in this article:

Corporate taxation: what are the differences between France and Spain?

Corporate income tax

Visit France, l'corporate income tax is based on a 25% fixed rate. At Spain, l'Impuesto de Sociedades (IS) is calculated on the basis of bearings and ranges from 15 à 30% according to company sales :

General VAT rate: 21%.	Almost all products and services
Reduced VAT rate : 10%	Certain goods and services, such as health, entertainment and sports products, catering, housing construction, etc., are sold on the open market.
Super-reduced VAT rate : 4%	Essential goods, such as basic foodstuffs, medicines or other medical products

We can see that the general rateat 21%, is slightly higher than the general rate in Francewhich stands at 20%, but remains lower than the European averagewhich is 21.13%.

Social security charges and employer contributions

In Spain, we calculate social security chargeswhich amount to approximately 36% of the employee's gross salary, according to the following scale:

Category	Employer	Employee	Total
General contribution	23,60 %	4,70 %	28,30 %
Unemployment : CDI	5,50 %	1,55 %	7,05 %
Unemployment: CDD	6,70 %	1,60 %	8,30 %
Work-related accidents and illnesses	Contributions determined according to a tariff set by the government, taking into account the risk specific to each activity
Wage guarantee fund (FOGASA)	0,20 %	-	0,20 %
Professional training	0,60 %	0,10 %	0,70 %

For a permanent contract, the employee social security contributions are 6.35% and employers' social security contributions is 29.90%. In France, the payroll expenses are much higher, from 21% to 23% of the gross salaryand employer costs are between 25% and 42% of gross salary.

Business tax

In Spain, companies are subject to theImpuesto sobre Actividades Económicas (IAE), a tax managed by local councils. Rates vary according to commune, business activity and number of employees. Only companies invoicing in excess of one million euros are taxed. taxpayersand all companies are exempt for the first two years.

What about tax deductions and tax credits for businesses?

In Spain, as in France, certain investments or expenses are eligible for tax credits. tax credits and tax deductions. For example: the R&D investments, Patent Box, l'investment in technological innovationWe are also involved in the creation of new jobs and the creation of jobs for the disabled. It should be noted that the Spanish government is working on a new regulationthe "Startup Law"which aims to develop theinnovation and theentrepreneurship on its territory. From tax benefits specific to start-ups, investors and employees should see the light of day by the end of 2022, notably on the benefits of stock options.

Individual taxation in Spain: basic principles of income tax

L'Impuesto de la Renta sobre las Personas Físicas (IRPF), the equivalent ofincome taxis withholding tax by the employer. Workers are also required to complete a annual tax return to adjust the amount paid, if necessary. The calculation is made by tranches and deductions apply. Here is a comparison of scales used at France and in Spain :

France - Tax Brackets	France - Tax Rate	Spain - Tax Brackets	Spain - Tax Rate
Up to €10,225	0%	From €0 to €12,450	19%
From €10,226 to €26,070	11%	From €12,451 to €20,200	24%
From €26,071 to €74,545	30%	From €20,201 to €34,000	30%
From €74,546 to €160,336	41%	From €34,001 to €60,000	37%
More than €160,336	45%	From €60,001 to €300,000	45%
-	-	Over €300,000	47%

There is also a special tax arrangements for foreigners to work here: the Beckham Law. This system, which is highly advantageous above a certain income threshold, enables expatriates to pay a 24% flat-rate income tax on their Spanish incomefor the first 5 years.

Conclusion

Visit French tax systems and Spanish share many common principles, but theSpanish taxation is a little more flexible than theFrench taxation. Above all, the two systems differ almost systematically when it comes to applied rates and calculation methods. Don't overlook these differences, and when it's time to make decisions, let us help you make them. administrative and financial experts !

Tax regimes: France vs. Spain

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