Understanding Taxes, Rates, and Special Contributions in Spain
**Concept of Tribute**
Tribute is the obligation to pay a sum of money to the government to sustain public expenditure. Clause 21 of the General Tax Law (LGT) states that “taxes are the revenues which consist of cash benefits required by the Government as a consequence of making the assumption that the law made it duty-bound to contribute.”
**Specifications**
- a) Monetary obligation: It is to give an amount of money.
- b) Obligation required by a public entity.
- c) Legal obligation: It has to be made by law.
- d) It is constitutive in nature, not punitive.
**Taxes**
Taxes are levied without consideration. Their taxable event consists of acts or business dealings that demonstrate the taxpayer’s economic capacity.
**Types of Taxes**
**1) According to the Object**
- Taxes on income (Income Tax, Corporate Income Tax)
- Taxes on wealth (Property Tax, Inheritance and Gift Tax)
- Taxes on consumption (VAT, Special Taxes)
**2) Two Points of View**
- a) Economic:
- Direct: Records the first manifestation of direct economic capacity (Personal Income Tax).
- Indirect: When recording the first manifestation of indirect economic capacity.
- b) Legal:
- Direct: The law does not permit the transfer of tax liability to another person.
- Indirect: The tax can be transferred to a third person (VAT).
**3) Personal vs. Real**
- Personal: Making reference to a person (Personal Income Tax).
- Real: Treating the object (Property Tax).
**4) Subjective vs. Objective**
- Subjective: They are required taking into account personal circumstances.
- Objective: They are required without regard to the personal circumstances of the taxpayer.
**5) Instantaneous vs. Periodic**
- Instantaneous: The taxable event occurs in a single act (VAT).
- Periodic: The taxable event extends over a period of time (Personal Income Tax).
**6) Fiscal vs. Extrafiscal**
- Fiscal (funding): The objective is only the collection of revenue.
- Extrafiscal (regulation): In addition to collection, they pursue other aims.
**Rates**
Article 2.2 a) of the LGT states that “rates are taxes whose taxable event consists of the private use or special exploitation of the public domain, or the provision of a service or the performance of an activity under public law that refers to, affects, or benefits the taxable person in a particular way, where the application of the taxable person’s assets or service or activity is voluntary or the service or activities are not provided by the private sector.”
**Characteristics**
- i) Established through the law.
- ii) The maximum amount of the rate is the cost of the service or activity.
- iii) The taxpayer specifically benefits from the permanent use of the public domain or the service provided by the administration.
- iv) The rate is required when using exclusive products of the public domain. However, in some cases, prior deposit may be required.
**Classes of Rates**
**According to Taxable Event**
- i) Special exploitation or private use of the public domain.
- ii) Provision of a service or performance of an activity by the administration.
**According to the Active Subject**
- State, regional, and local.
**Special Contributions**
Special contributions are taxes whose taxable event consists of the taxable person obtaining a benefit or an increase in the value of their assets as a consequence of the performance of public works or the establishment or extension of a public service.
**Elements**
- i) Ordinary tax revenue of local entities (municipalities).
- ii) Tax authority required from the point of view of the active subject.
- iii) The taxpayer is the natural or legal person who obtains a special benefit or an increase in the value of their assets as a consequence of the performance or extension of a public service.
- iv) Tax base: Constituted by a maximum of 90% of the cost of the work or public service.
- v) Tax liability: The base is determined by distributing the taxable amount among the benefited subjects according to the criteria set out in the regulations.
- vi) Accrual: The special contribution is accrued when the public works are completed or the public service is put into operation (general rule), but in the case of very large constructions, payment may be made in installments as the work is completed.
**Classes of Special Contributions**
**a) According to Taxable Event**
- i) Performance of public works.
- ii) Establishment or extension of a public service.
**b) According to the Active Subject**
- State, regional, and local.