Tax regimes: France vs. Spain
- Iter Advisors
Contents
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 significant differences. It's essential 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. Iter Advisors helps you take stock in this article.
Corporate taxation: what are the differences between France and Spain?
Corporate income tax
In France, corporate income tax is based on a flat rate of 25%. In Spain, Impuesto de Sociedades (IS) is calculated on a tiered basis and ranges from 15% to 30% depending on the company's sales:| New companies | 15% for the first two years |
| Chiffre d’affaires annuel < 5 millions d’euros | 20% on the first €300,000, then 25% thereafter |
| Chiffre d’affaires annuel < 10 millions d’euros | 25% on the first €300,000, then 30% thereafter |
| Annual sales > 10 million euros | 30% |
Apprenticeship tax
It does not exist in Spain.Business tax
Likewise, it does not exist in Spain.Annual lump-sum taxation
Likewise, it does not exist in Spain.VAT
Impuesto sobre el Valor Añadido (IVA), the equivalent of VAT in Spain, is governed by 3 types of rates:| 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 |
Social security charges and employer contributions
In Spain, social charges, which amount to around 36% of the employee's gross salary, are calculated 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 % |
Business tax
In Spain, companies are subject to the Impuesto sobre Actividades Económicas (IAE), a tax administered by local councils. Rates vary according to commune, business activity and number of employees. Only companies invoicing over one million euros are liable, and 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 and expenses are eligible for tax credits and deductions. For example: investment in R&D, Patent Box, investment in technological innovations, film productions, audiovisual series and certain shows, job creation and job creation for the disabled. Note that the Spanish government is working on a new regulation, the "Startup Law", which aims to develop innovation and entrepreneurship on its territory. Specific tax benefits for start-ups, investors and employees should be in place by the end of 2022, notably on stock option profits.Individual taxation in Spain: basic principles of income tax
The Impuesto de la Renta sobre las Personas Físicas (IRPF), equivalent to income tax, is deducted at source by the employer. Workers must also file an annual tax return to adjust the amount paid, if necessary. Calculation is by bracket, and deductions apply. Here is a comparison of the tax scales used in France and 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 regime for foreigners moving to Spain to work: the Beckham Law. This scheme, which is highly advantageous above a certain income threshold, allows expatriates to pay a fixed income tax of 24% on their Spanish income for the first 5 years.
Conclusion
The French and Spanish tax systems share many common principles, but Spanish taxation is somewhat more flexible than French. Above all, the two systems differ almost systematically in terms of the rates applied and calculation methods. Don't overlook these differences, and when it's time to make decisions, enlist the help of administrative and financial experts!Find all the content produced by our CFOs: articles, theme sheets, testimonials, downloadable templates, etc.