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Practical Handbook for Companies 2021

What is Corporation Tax?

Regulation: Articles 1, 2 and 3 LIS

The article 31 of the Spanish Constitution demands the contribution to the support of public expenditure, in accordance with the economic capacity of each taxpayer.

One of the most direct and expressive manifestations of a person's economic capacity is the overall income obtained during a given period of time.

In this sense, the Spanish tax system establishes the Personal Income Tax (IRPF) to tax the income obtained by an individual.

However, when the income is obtained by a legal entity (company, association, foundation, etc.), or an unincorporated entity considered a taxpayer under the tax legislation (investment funds, UTE, pension funds, etc.), the Spanish tax system establishes Corporate Income Tax to comply with the constitutional obligation to contribute.

For this reason, corporate income tax, together with personal income tax, is a basic pillar of direct taxation within the framework of a tax system that regulates the obtaining of income as a manifestation of the economic capacity of each taxpayer.

Corporate Income Tax is defined as a direct, personal tax levied on the income of companies and other legal entities:

  • Direct nature, because it taxes the obtaining of income as a direct manifestation of the taxpayer's economic capacity.

  • Personal nature, because it takes into account certain particular circumstances of each taxpayer when determining the amount of the tax benefit that he is obliged to pay.


Corporate Income Tax applies throughout Spain. For these purposes, Spanish territory includes, in addition to mainland Spain, the Balearic Islands, the Canary Islands, Ceuta and Melilla, those areas adjacent to the territorial waters over which Spain may exercise the rights to which it is entitled, relating to the marine soil and subsoil, overlying waters and their natural resources, in accordance with Spanish legislation and international law.

The provisions of the previous section shall be understood as without prejudice to the tax regimes of the Economic Agreement and Economic Agreement in force, respectively, in the Historical Territories of the Autonomous Community of the Basque Country and in the Foral Community of Navarre, and to the provisions of the international treaties and agreements that have become part of domestic law (in relation to the Joint Taxation Regime of the State Administration and the Provincial Councils of the Basque Country and/or the Foral Community of Navarre, see Chapter 13 of this Practical Manual).