Among the types of taxes in Spain, there are direct taxes, such as corporate tax (IS), and indirect taxes, such as value-added tax (VAT) and ITPAJD (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados; in English, Transfer Tax and Stamp Duty).

In this article, we’ll explain what ITPAJD is, its components, how it’s calculated, and what steps you must take to declare it and comply with your tax obligations.

What’s in this article?

• What is ITPAJD?
  
• How is ITPAJD calculated?
  
• How does self-assessment for ITPAJD work?
  

What is ITPAJD?

ITPAJD is an indirect tax, which means it doesn’t vary according to the economic situation of the taxpayer but varies according to the goods or services taxed. It is a state tax, though the power to collect it has been delegated to each autonomous community. ITPAJD is made up of three taxes:

• TPO: The tax on chargeable property transfers (“transmisiones patrimoniales onerosas”) is applied to any transfer of goods or rights, provided it is a transaction not subject to VAT. For example, a secondhand vehicle sold by a private individual would be subject to TPO. However, if that same car is sold by a company, it would be subject to VAT instead, and the tax on chargeable property transfers would not be applied. Secondhand homes are subject to the transfer tax whether the sale is made by a company or a transaction between private individuals. This tax also applies to loans made between family members and administrative concessions.
  
• AJD: Stamp duty (“impuesto sobre actos jurídicos documentados”) is a tax levied on commercial paperwork and any deed that becomes part of a notarial record.
  
• OS: The corporate operations (“operaciones societarias”) tax is levied on commercial operations. Of the three taxes that make up ITPAJD, OS affects Spanish businesses the most—and we’ll focus primarily on this in the guide.
  

Which businesses pay ITPAJD on corporate operations?

Businesses in Spain must pay the ITPAJD OS if they have carried out these commercial activities:

• Reduction of a company’s capital.
  
• Dissolution of a company, provided it involves returning contributions to the partners who formed the company. This corporate operation will be subject to ITPAJD if the dissolution does not occur under the special regime specified in Law 27/2014.
  

Many operations had been subject to the corporate operations tax, but that changed in December 2010 with the approval of Royal Decree Law 13/2010. To encourage investment and job creation, the regulation exempts these business activities from this tax:

• Incorporation of a company.
  
• Increase of a company’s capital.
  
• Contributions by one or more partners that do not increase the company’s capital.
  
• Transfer of the registered office to Spain. Regardless of whether the transfer affects the registered office or the effective address, this operation will not be subject to ITPAJD OS tax if neither of the headquarters was originally within the European Union.
  

Though Royal Decree Law 13/2010 reduces the tax burden compared with previous regulations, it also includes several cases in which entities that are not considered companies, legal entities, or communities of property would still be required to self-assess ITPAJD:

• Any legal entity that, despite not being a corporate entity, has a profit-making purpose.
  
• A joint ownership company formed as a result of acts inter vivos, provided it engages in business activities.
  
• A joint ownership company formed as a result of mortis causa, if the business continues to operate for more than three years.
  
• Joint venture agreements.
  

How is ITPAJD calculated?

In 2009, Law 22/2009 was passed to regulate the financing of the autonomous communities. As a result of the law, the state delegated the administration of ITPAJD to each of the autonomous communities. Though each autonomous community can apply its own calculations and tax rates, some of the taxes that are part of ITPAJD are calculated in the same way throughout Spain.

OS tax

This tax included in ITPAJD is 1% (the general rate)—this is always the same, regardless of the autonomous community or other factors. This percentage is applied to the taxable base, which is calculated differently depending on the type of transaction:

• Reduction of capital or dissolution of a company: The taxable base is the value of the rights and assets transferred to each partner. To calculate it, no debt or expense is subtracted from the taxable base.
  
• Transfer of the registered office: The taxable base is the liquid assets, which refers to the net value of the assets available to the company on the same day when the change of registered office is agreed upon.
  
• Incorporation of a company or increase of its capital: The tax base is the nominal amount, which is the value of the shares established initially or increased subsequently by adding the stock issue premiums.
  
• Contributions by one or more partners that do not increase the capital: The taxable base is established at the net amount contributed, which is the value of each asset or right, subtracting any charge or expense that can be deducted. The amount of debts assumed by the company because of this contribution is also subtracted.
  

Any operation subject to ITPAJD will be accrued (i.e., the obligation to pay the tax is generated) on the same date the relevant operation takes place. Though some of these operations might be exempt from the tax (as discussed regarding Royal Decree Law 13/2010), they must all be included in Form 600.

Transfer tax (ITP)

It’s common for businesses in Spain to pay the tax on business operations (the other ITPAJD levies are less common), but one sector has a strong connection with ITP: real estate companies that deal with the purchase and sale of used homes must pay the transfer tax on their transactions.

If this applies to you, you should know that, unlike the OS tax, ITP varies according to the autonomous community.

What does the value audit consist of?

According to the ITPAJD autonomous regulations, each autonomous community establishes the percentage of transfer tax it considers appropriate. For example, ITP in Castilla y León (8%-10%) is much higher than that of Madrid (6%).

Because this is a percentage calculation, the amount due will depend on the value of the transaction subject to the tax. However, the tax authority might not always agree with the transaction value declared by the company or taxpayer.

In some cases, the buyer might undervalue the transaction deliberately to pay less tax. To prevent this from happening, the authority (specifically, the tax agency of the autonomous community where the transaction occurs) conducts a value audit to determine the reference value, which is the minimum amount it considers justifiable for the sale. If the amount declared by the taxpayer is below this threshold, the tax authorities might conclude that the real estate transaction has probably not taken place for such a low amount.

When a property is purchased, the buyer is responsible for self-assessing ITPAJD. If the authority’s calculations show that the minimum value of the property is higher than the declared value, the taxpayer will receive a notice informing them the declared value is unreasonably low. In this case, the taxpayer must pay the difference in the tax calculation and an additional percentage as a surcharge and a penalty.

If there’s an error in the authority’s calculations, taxpayers may file an objection stating the reason why the declared value is below the threshold established by the autonomous tax agency. For example, the seller might have applied a substantial discount if the property has a significant defect requiring extensive renovation, and the administration might not have taken this into account.

How does self-assessment for ITPAJD work?

As mentioned, the majority of companies in Spain are required to self-assess one of the three taxes included in ITPAJD (the tax on corporate operations) using Form 600. This is considered a self-assessment because the taxpayer files the return, calculates the amount, and submits the payment to the authority—as opposed to a settlement in which the authority determines the amount and requests payment.

To pay the amount due, you must go to a bank approved by the authority and deposit the amount specified in Form 600. When self-assessing the OS part of ITPAJD, you must include documentation detailing the taxed business activity, such as the original contract, accompanied by a photocopy.

Because business operations do not benefit from subsidies or adjustments, there is no distinction between the gross amount payable and the resulting net amount payable after any subsidies or adjustments. Therefore, both figures are identical when completing the Form 600 self-assessment.

Regardless of the number of corporate operations being self-assessed, you must specify the code for each one, based on these codes:

• NSJ: Corporate operations not subject to ITPAJD
  
• OST: Change of registered office
  
• OSS: Contributions that do not increase capital
  
• RSO: Decrease in the company’s capital or dissolution of the company
  
• CSO: Incorporation of a company
  
• OSA: Increase in the company’s capital
  
• OSV: Any other corporate operations
  

When self-assessing the OS tax for ITPAJD, you can also declare the other two taxes that are part of it: TPO and AJD. Though these two taxes are less common for most companies, it’s important to note they are also reported on Form 600.

This guide has clarified what ITPAJD is, how it’s calculated, and the steps required for self-assessment. We’ve summarized the key points to help you manage your company’s tax obligations. If you have any questions about how these rules might affect your situation, we recommend you contact a tax advisor for personalized guidance.