From 1 January 2025, the tax landscape in Spain will change drastically with the amendment of article 29 of Law 27/2014, of 27 November, on Corporate Income Tax (LIS). Small and micro companies are in luck! A progressive tax reduction will be implemented that will reduce their tax liability, allowing them to compete more strongly in the market. In the meantime, the general rate remains at 25%.
This reduction will not be immediate, but will be applied in a gradual manner according to a transitional regime (transitional provision 44th of the LIS).
Small Companies: Lower Taxes, Greater Growth!
If your company generates less than €10 million in annual revenue, you are in luck. Here is how the tax rate will evolve in the coming years:
• Before 2025: 25%
• 2025: 24%
• 2026: 23%
• 2027: 22%
• 2028: 21%
• From 2029 onwards: Only 20%!
A 5% reduction that will allow you to allocate more resources to growing your business!
Micro Companies: Lower Taxes for the Smallest Players
Microenterprises, those with an annual turnover of less than €1 million, will also benefit from progressive tax relief. But there’s more! A graduated system is introduced, favouring businesses with lower taxable income:
• Before 2025: 23%
• 2025: 21% for the first €50,000 of taxable income and 22% for the rest.
• 2026: 19% for the first €50,000 of taxable income and 21% for the rest.
• From 2027 onwards: 17% for the first €50,000 of taxable income and 20% for the rest.
Entrepreneurs could see their tax burden reduced by up to 6% in some cases! Undoubtedly, fantastic news for those striving to grow their businesses.
Important situations you should know about
• Do you have a holding company? If your company does not carry out an economic activity and has an income of less than 10 million euros, you will not be able to benefit from these tax advantages. You will continue paying tax at a rate of 25%.
• What happens if my company is no longer a holding company? If your company generated less than 1 million in revenue in the previous year and is now carrying on an economic activity, you will qualify for the reduced rate for micro-enterprises, even if you were previously classified as a holding entity. A relief for those who want to expand.
What is the corporate tax rate in other countries?
Corporate tax rates in different countries are anything but uniform, and some countries are taking bold steps to attract companies with drastically reduced tax rates. Let’s talk about a selection of 8 countries:
• Germany: The general tax rate is 30%.
• France: The general tax rate is 25%. However, there is a reduced rate of 15% for companies with revenues of less than EUR 10 million, on profits of up to EUR 42,500.
• Italy: The general tax rate is 24%.
• United States of America: The tax rate is between 21% and 29.87% depending on the state where the company is domiciled.
• Portugal: The general tax rate is 21% (20 Madeira and 16.8 Ozores). However, there is a reduced rate of 17% on taxable income up to EUR 50,000 for small companies.
• Canada: Up to 500,000 Canadian dollars the applicable tax rate is between 11% and 13% depending on the federal territory where the company is domiciled, the difference is taxed at a rate between 23% and 27%.
• Ireland: The general tax rate is 12.5%. However, certain types of income such as interest and rents are taxed at 25%.
• United Kingdom: There are three possible scenarios, companies with a profit of up to 50,000 pounds are taxed at 19%, companies with a profit up to 250,000 pounds, are subject to a system of marginal reliefs, which gradually increases the corporate tax rate from 19% to 25% as profits increase, and, finally, companies with a profit of more than 250,000 pounds will be taxed on the whole profit at 25%.
Conclusion: A Brighter Future for Small and micro companies.
This new tax system is a real breath of fresh air for thousands of small business owners and entrepreneurs. The progressive reduction of the tax rate will allow companies to invest more in innovation, employment and expansion.
If you are a small or micro company, now is the time to take advantage of these benefits and prepare for a 2025 full of opportunities: the future is yours!
