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Corporation Tax: What it is and When to File it

Corporation tax is the tax obligation assumed by legal entities having obtaine Income in a fiscal period, usually one calendar year. In other words, this tax element taxes companies’ Income and other legal entities.

Through this type of tax, the organization declares its economic capacity since it states that it has received Income. This tax provides an essential part of the State’s income and, therefore, can understood as complementary to personal income tax within the fiscal panorama.

Who Pays Corporate Tax?

The corporate tax falls on different legal entities, such as companies, associations, groups, foundations, and institutions. In addition, it is also legally applicable to other entities present in the economic reality, such as funds (for example, investment or pension funds). The corporate tax also affects those organizations that reside or have their fiscal domicile in the country.

Of course, this type of tax also affects limited companies or sole proprietorships, including people who enjoy the status of autonomous subject.

Characteristics of Corporate Tax

Corporate tax is direct, personal, and periodic, as is personal income tax (IRP). Although, unlike the IRP, the corporate tax rate is proportional. It does not increase as profits increase. All companies pay the same tax rate. Of course, the more benefits obtaine, the greater the amount to be paid in monetary terms.

On the other hand, there are a series of incentives by which entities can reduce the amount of taxes they pay. These incentives are granted to companies if they meet a series of conditions related to the number of employees they have, the investment in innovation, the training of employees, the level of turnover they present annually, or the age of their economic activity, among other conditions.

Therefore, the Corporate Tax is:

  • Direct: Directly taxes the Income, which is proof of the aforementioned economic capacity of the declarant. See the difference between direct and indirect taxes.
  • Personal: It is about taking into account each taxpayer’s circumstances.
  • Periodic: It is paid periodically. The taxable event occurs indefinitely over time. The tax is not punctual or instantaneous, but it is pay continuously over time in different tax periods, divide according to the legislator (for example, annually).
  • Proportional or flat: The tax rate does not depend on the tax base. The percentage of taxes paid on benefits is the same regardless of the number of benefits.

How Much is Pay for Corporate Tax?

As indicated by the Tax Agency, this tax is the State’s responsibility. Therefore, the same tax is apply throughout the Spanish territory, except in the Basque Country and Navarra. This year, according to the General State Budget (PGE), a minimum rate of 15% has been creat for companies. That have invoiced 20 million euros or more in the 12 months before the tax period or that pay taxes under the fiscal consolidation, in this case, whatever the amount of your turnover. This year’s PGE also introduced the so-called minimum liquid quota. Which may not be less than 15% of the tax base, once reduced or increased, as appropriate. In other words, after applying the deductions according to each case, the liquid quota can never be less than that amount.

When do you have to Pay Corporate Tax?

For the payment of corporate tax, organizations must fill out the following forms:

Form 200 for the annual corporate tax return. It is the declaration of the Income of the companies. It can submitted between July 1 and 25 of each year and is mandatory. Even if no activity has been carrying out or no income subject to this tax has been obtaine.

Form 202, for installment payment of corporate tax. It is an installment payment in advance of the next model 200. It must present in the months of April, October and December if a positive result has been obtained in the presentation of form 200 of the previous year. The rate to be apply, in general, is 18% of the amount that was pay in model 200 of the last year and 24% for companies that invoice more than 10 million euros per year.

Conclusion

A corporate tax, also called company tax or company tax, remains a direct tax. Imposed on the Revenue or capital of corporations or analogous legal entities. Many states impose such taxes at the national level, and a similar tax may remain to assess at a state or local level.

Also Read: Why Would a CRM Like Hubspot Invest in Creators?

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