Spanish Commercial Law and Taxation Overview
Legal Framework for Commerce in Spain
Commercial Code and Special Laws
The Commercial Code governs most commercial operations in Spain. However, specific areas are covered by special laws due to the evolving nature of business activities. These include the Bankruptcy Act, Unfair Competition Law, Advertising Act, Trademark Law, and others.
Business Duties and Accounting Standards
Employers are obligated to maintain accurate accounting records, enabling chronological tracking of operations, inventory balances, and annual accounts. These records must be accessible to authorized personnel.
Companies are required to document all resolutions passed in general meetings and other corporate bodies, including summaries of discussions, interventions, and voting results.
Competition, Advertising, and Intellectual Property
Competition Law
The Competition Act aims to ensure fair market competition by prohibiting behaviors that restrict or distort market dynamics. This includes price-fixing, market-sharing, and abuse of dominant positions.
Unfair Competition and Advertising
Laws against unfair competition address practices like omitting or distorting product information and disparaging competitors. The Advertising Act promotes fair advertising practices, prohibiting misleading, unfair, and subliminal advertising.
Intellectual Property and Consumer Protection
Industrial property laws protect creators of new inventions and techniques applicable to industrial processes. These laws also protect producers and manufacturers through trademarks and other distinctive signs.
Specific forms of industrial property include patents for inventions, utility models, industrial designs, trade names, trademarks, and establishment labels.
The Consumer Protection Law ensures consumers’ right to compensation for damages caused by goods or services and establishes penalties for non-compliant businesses.
Commercial Registry (RM)
The RM, a state agency under the Ministry of Justice, provides official public advertising of registered businesses. Its functions include:
- Registering companies upon their constitution.
- Legalizing company books and appointing auditors.
- Registering appointed proxies.
The RM is divided into territorial offices and a central registry. The information provided by the central registry is for informational purposes only; official certifications must be obtained from the relevant provincial office.
Legal Framework for Taxation
General Tax Law and Budget
The General Tax Law establishes the framework for tax regulations, defines key tax concepts, and outlines the procedures for tax administration. The annual State Budget details the government’s financial plan, including projected expenses and revenues.
Taxes and Classifications
Types of Taxes
- Rates: Payments for public services or specific actions by a public entity.
- Contributions: Payments to a public entity for a specific purpose, benefiting both the taxpayer and the community.
- Taxes: Payments required by the public administration without direct consideration or specific destination for the taxpayer.
Tax Classifications
- Progressive: The tax rate increases with the tax base.
- Regressive: The tax rate decreases as the tax base increases.
- Proportional: The tax rate remains the same regardless of the tax base.
Direct Taxes
- Income Tax (IRPF): A personal, direct, and progressive tax on the income of individuals, considering their personal circumstances. It covers income from work, property, capital assets, economic activities, and capital gains and losses.
- Corporate Income Tax (IS): A direct tax on the income of corporations and other legal entities. The tax base is the income earned during the fiscal period, including yields and changes in assets. The general tax rate is 30%, with some variations for specific sectors like SMEs.
- Economic Activities Tax (IAE): A local tax levied by municipalities on the exercise of economic, professional, or artistic activities within their territory.
Indirect Taxes
- Value Added Tax (VAT): A tax on the value added to goods and services at each stage of production and distribution. It applies to the supply of goods and services, intra-community acquisitions, and imports. VAT rates vary depending on the type of goods or services (4%, 7%, and 16%). Businesses act as intermediaries, collecting VAT from customers and remitting the difference between output and input VAT to the tax authorities.
Taxes and Society
Taxes are the primary source of revenue for the State, enabling it to fund public expenditures. Tax evasion, the deliberate avoidance of tax obligations, is a crime punishable under the Criminal Code.