1. General overview.
2. Tax on Economic Activity.
3. Real Estate Tax.
4. Municipal taxation of the increase in value of urban land.



1.1 Legislation.

  • Law 39/1988, dated December 28, Local Administration Act.

1.2 General characteristics and types

Local taxes are classified by virtue of whether local entities (provinces, municipalities, town halls) may or must levy them and are of the following nature:

Obligatory Taxation:

  • Tax on Economic Activity.
  • Tax on Real Estate.
  • Tax on Mechanical Traction Vehicles.

Discretionary Taxation:

  • Tax on Construction, Installations and Works.
  • Tax on the Increase in the Value of Urban Land.
  • Municipal Tax on Luxury Expenses.

Local Administrations are responsible for the oversight of these taxes by supervising the tax itself, or by delegating certain responsibilities to the Autonomous Communities or Local Supramunicipal Entities.


2.1 General overview.

The Tax on Economic Activity has been in effect since January 1, 1992. Its main purpose is to collect information regarding economic activities of tax payers.

Also regulated by:

  • Legislative Royal Decree 1175/1990, Tariffs of the Tax and its proceedings, updated by Royal Decree-Law 12/1995, dated December 28th.

2.2 Taxable activity.

(i) Concept.

Taxable activity consists of the mere exercise of an economic activity within the Spanish territory. The effective generation of profit is not a requirement for this tax to apply.

Economic activity is understood to mean the organization for one's own behalf of the means of production and human resources, or one of the two, with the purpose of intervening in the production or distribution of goods or services.

(ii) Types.

2.(ii)(i) Business activity.

  • Industrial, mining, commercial or service activities.
  • Economic activities, when developed by individuals, and legal persons or entities defined in Article 33 of the General Tax Act: business organizations without legal personality which constitute an economic unity or a separate patrimony which can be subject to taxation.
  • Independent cattle ranching activity.

2.(ii)(ii) Professional activity.

Professional activities are activities of a professional character when natural persons perform them.

2.(ii)(iii) Artistic activity.

Artistic activities are activities of an artistic nature when performed by natural or legal persons.

(iii) Not subject to taxation.

  • Alienation of a fixed asset of the business when the asset remained in the business for a period exceeding two years;
  • The sale of goods for a particular use having been acquired two years before;
  • Sale of products received in compensation of personal work or professional services;
  • The exposition of decorative or adorning articles;
  • Operations of isolated sales by individuals for small amounts.

2.3 Taxpayer.

  • Natural persons.
  • Legal persons.
  • Business organizations without legal personality which constitute an economic unity or a separate patrimony which can be subject to taxation.

2.4 Assessed tax.

(i) Coefficients for the calculation.

  • The tax quota fixed by the tariffs can be of the following types of tax quota:

a) Minimum or Municipal tax quota to which is added the Municipal Surcharge (Formed by the Coefficient of Increase plus Situation Index);

b) Provincial or National Assessed Tax (The Municipal Surcharge is not applicable).

  • The Coefficient of Increase: The maximum values of these coefficients are established as a function of the number of inhabitants of each municipality. Varying between 1.4 and 1.9.
  • The Situation Index: is based on the category of the streets of each municipality, varying between 0.5 and 2.0., in which the economic activity is carried on.
  • Provincial Surcharge: The Provincial Deputations, the Insular Councils of the Balearic Islands, the Insular City Councils of the Canary Islands and the Autonomous Community Provincial Councils can establish, voluntarily, a surcharge on this tax. The maximum surcharge of this tax is established at 40 per cent.

A basic principle establishes that the assessed tax cannot, in any case, be greater than 15 per cent of the presumed average profit of the activity taxed.

(ii) Elements for the calculation.

  • Installed electric power: Result of adding the registered powers of the energy elements of the activity.
  • Number of workers: The workers actually dedicated to the activity, not including the management or directors.
  • Population: All of the residents registered with the municipal authorities.
  • Appraisal of the performance facilities: number of seats.

2.5 Tax period and tax assessment.

The taxable period coincides with the calendar year and the tax is assessed the first day of the period.

Payment is effected upon receipt, except declarations of commencement or inclusions, that are collected through individually notified payment.

2.6 Formal obligations.

(i) General rule.

The taxpayers must communicate to the Administration, by formal declarations, the circumstances that imply their inclusion or non inclusion in the Tax on Economic Activity register as well as whatever variation of information that was declared.

(ii) Types of declaration.

  • Declarations of commencement: must be formulated, independently for each one of the activities performed, by the taxpayer and within the period of 10 working days immediately preceeding the commencement of the activity.
  • Declarations of variation: all of the variations that have importance (consequence) for this tax must be notified to the Administration for each activity in separate form and within the period of one month to be counted from the date on which the variation was produced. However, it will not have effect in the registration until the fiscal year following the one in which it was produced.
  • Declarations of termination: it is filed within the period of one month from the date of the cessation of the activity.
  • The declarations must be filed: for Municipal or Provincial Tax, in the Delegation of the Treasury in the place where the activity will be conducted; for National Tax, in the taxpayer's tax domicile.

(iii) Tariffs and proceedings of the tax.

Tariffs and proceedings are differentiated in three groups of activities:

  • Business.
  • Professional.
  • Artistic.

The rates are systematized by sections which in turn are composed of:

  • Divisions: Grouping fundamental sectors.
  • Assemblies: Grouping related activities.
  • Groups: Certain activities in general.
  • Inscriptions: Concrete activity.


The Real Estate Tax, is a tax of a direct character, in rem, of the municipality and of a compulsory nature, whose supervision is shared between the National Administration and municipal authorities.

Taxable property is real estate or in rem rights (usufruct or surface rights) or administrative concessions on rural or urban real estate.

Objective exemptions are established, as a function of the quantity of the taxable basis of the tax (urban real estate less than 100,000 ptas. value and rural real estate less than 200,000 ptas. value are exempt) as well as subjective exemptions, as a result of the special characteristics of the taxpayer who is the owner or holder of the in rem rights on the real estate (municipal real estate, property of the Red Cross, public domain).

The taxable base coincides with the land record value of the real estate, set by the Administration, and, in general, on this basis a 0.4 per cent rate is applied to urban real estate and 0.3 per cent to rural real estate in order to obtain the tax.

The taxable period coincides with the calendar year. The assessment is produced the first day of the taxable year.


The taxable income are those presumed capital gains which arise from the transfer of the property or an in rem right of enjoyment over the property.

Certain government entities are exempt, such as the National government or the Autonomous Communities, who are the titleholders of real property.

The taxpayer will be identified depending on whether the transfer takes place with or without consideration. If it takes place for consideration, the taxpayer is the transferor, and if not, the taxpayer is the acquirer.

The presumed capital gains are calculated by applying to the cadastral value on the date of transmission the percentage for the calculation of increase according to the number of years passed since acquisition. The result is multiplied by the tax rate that each municipal government has fixed from the maximum and minimum figures as set by law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Florentino Carreno on +341 524 7100
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