Payment of business tax in Spain
The business Tax on Economic Activities is a tax that all SMEs must take into account when paying their taxes. In this post we are going to tell you about the characteristics of the Tax on Economic Activities and the payment process.
What is the business Tax on Economic Activities (IAE) in Spain?
The Economic Activities Tax (IAE) is a local tax in Spain that is levied on the exercise of any business, professional or artistic activity carried out in Spanish territory. This tax applies to both individuals and legal entities and is calculated according to the nature and volume of the economic activity carried out.
Although it is collected by local councils, it is regulated by state legislation. IAE is paid annually and the amount varies according to factors such as the size of the business, its location and the type of activity. It is important for local financing and reflects the economic capacity of the taxpayer.
How to pay the IAE
The Tax on Economic Activities (IAE) is a tax levied on the performance of any economic activity in Spain. The amount to be paid, the method of payment and the collecting entity have specific characteristics.
How much is paid
The amount of IAE depends on several factors such as the type of activity, the location of the business, its size and its economic capacity.
The taxable base of the IAE is calculated according to rates that classify economic activities under different headings. Each heading has a tax rate that can be fixed or variable.
For larger companies, the quota can be increased according to variables such as the number of employees, the contracted electrical power or the cadastral value of the property.
How to pay
IAE is paid annually.
Taxpayers can pay directly at authorised bank offices or by electronic payment systems if available.Who collects it
IAE is collected by the municipalities where the economic activity is carried out.
Although it is a local tax, it is regulated by state legislation and forms part of the Spanish tax system.It is important to note that small businesses and the self-employed may be exempt from this tax during the first years of activity or when they do not exceed certain turnover limits, according to current legislation. In addition, each local council may establish additional allowances or exemptions.
IAE tax exemptions
The Economic Activities Tax (IAE) has several exemptions that may apply depending on the nature and size of the economic activity:
- Newly created companies: During the first two years of activity, newly created companies may be exempt from paying IAE.
- Small entrepreneurs and professionals: Self-employed and small entrepreneurs whose turnover does not exceed one million euros (limit established by law and normally updated annually) are exempt from IAE.
- Non-profit entities: Non-profit entities, such as foundations, associations and religious entities, are generally exempt from paying this tax.
Activity-specific exemptions: Some economic activities may have specific exemptions according to current regulations or municipal ordinances.
These exemptions are designed to alleviate the tax burden on entrepreneurs, small businesses and non-profit entities. However, it is important to consult current state and local regulations, as the conditions and limits of these exemptions may vary.
Can I apply for a refund of the fee if I cease the activity?
If you cease to carry out your economic activity during the tax year, you may be entitled to a refund of part of the Economic Activities Tax (IAE). The procedure for requesting a refund is as follows:
- Notification to the local council: You must notify the local council where the IAE was paid that you have ceased your activity. This notification should be made as soon as possible after the cessation of the activity.
- Submission of the application: Submit an application for the IAE tax refund providing details of the ceased activity and the exact date of cessation.
- Additional documentation: Attach any documentation supporting your application, such as deregistration from the register of economic activities or the self-employed regime.
- Review and resolution: The municipality will review your application and issue a resolution. If approved, a proportional refund of the fee paid for the period in which the activity was not carried out will be made.
It is important to keep up to date with local regulations and ensure that you comply with all the requirements and deadlines to guarantee the effective refund of the fee.
At Asesoría Orihuela Costa we offer you the advice you need for the management and payment of your business taxes. Our team will assess the deductions you can take advantage of and take into account the deadlines for each of the payments, so that you can worry about what really matters to you, your business.
