Tax Exemptions and Calculation of Rates in Spain
3) Exemption
Law 51/2002 introduced a very broad exemption. It exempts all individuals who carry out an economic activity. Resident companies whose turnover is less than one million euros are also exempt from the IAE (Impuesto sobre Actividades Económicas).
Turnover, in essence, refers to sales activity. There are also exemptions for starting the activity: the first two years for all activities. Along with this, there is a 50% bonus for the five years following the first two years; this is mandatory for the City Council regarding professional activities.
Finally, there is a bonus of up to 50% for five years after the first two years, which the City Council can voluntarily apply to all business activities.
4) Determination of the Tax
A legislative decree of 1990, with subsequent amendments, sets the tax collection rates. There, we find a long list of economic activities arranged by headings and subheadings. Rates define the content of the activity; fees are determined by tax items such as the number of workers, the installed capacity, electricity consumption, etc.
There are activities for which a fee is stated. Certain activities are provided for the local surface element. The determination of the fee is done in a manner analogous to the objective assessment, based on parameters such as the number of workers and the installed capacity, including:
- Minimum Fee: This is derived from municipal rates.
- Weighting Factor: A mandatory factor (for municipalities to use) based on turnover. The minimum ratio is 1.29 and the maximum is 1.35. This ratio is multiplied by the minimum fee.
- Situation Coefficient: Municipalities can set this (not required) depending on the category of the street where the premises are located. The minimum ratio is 0.4, and the maximum rate is 3.8%. There may be up to 9 categories of roads.
Example:
MINIMUM FEE: 100
WEIGHTING Coefficient: 1.30
SITUATION Coefficient: 1.5
TAX RATE: 100 x 1.30 (Weighting Coefficient) = 130; 130 x 1.5 (Situation Coefficient) = 195
Provincial and national quotas are expected for those activities that take place in several municipalities in the province and for activities carried out in several provinces.
In these cases, the situation ratio does not apply. The settlement of provincial and national dues is the responsibility of the Tax Agency.
5) Application Management
The IAE is managed by the census and registration, and collection is by receipt. Regarding the declaration of registration, the taxpayer has the duty to register, communicating to the management the information necessary for it to settle.
Regarding the census and registration, census management is the responsibility of the State Tax Agency; the census includes all taxpayers. The amendment requires notification of the taxpayer census.
The enrollment refers to the municipality and contains the activities, subjects, and minimum payments. Against acts of census management of the tax, a claim can be made to the economic-administrative courts of the State.
Regarding the settlement, the authority to settle and collect municipal fees is applicable to the City Council, the venue of the activity. The City Council practices clearance from the tax registration. Against the settlement made by the City Council, an appeal for reinstatement can be made to the City Council.