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Spanish business activity tax

Whether an activity is liable to the Spanish business activity tax, what the bill comes to and from which year it is paid.

The tax accrues on 1 January and the turnover figure that decides it is two years old.
Does it pay the IAE?
Yes, liable
Turnover year that decides
2024
Registration in the roll
December 2025

None of the article 82 exemptions reaches this case, so the activity is taxed on whichever heading applies to it.

  • Rule 2 of article 82.1(c) takes the period whose filing deadline ended in the year before the accrual, so one year's IAE looks at turnover from two years earlier.
  • Article 5.3 of Royal Decree 243/1995 gives one month to register a new activity, but requires the return «during the month of December immediately before» when an exemption stops applying.
  • If the activity started less than two years ago, open «Refine» and correct the starting year: article 82.1(b) exempts the first two tax periods whatever the turnover.
  • Where the entity belongs to a group under article 42 of the Commercial Code, the turnover figure is the whole group's, whether or not consolidated accounts are required.
Refine: start of activity and previous ownership
Refine: start of activity and previous ownership

Article 82.1(b) exempts the first two tax periods, and its second paragraph denies the start where the activity came from another owner: a merger, a demerger or the transfer of a line of business does not open a fresh start.

General information, not tax advice. The tariff quota, the location coefficient and the provincial surcharge are data from your heading, your municipal by-law and your provincial council.

Common-regime territory. Navarre and the Basque historical territories have their own rules under their agreements.

Video: how to use the calculator

1

What the IAE taxes, and why almost nobody pays it

Article 78.1 defines the charge as «the mere carrying on, in Spanish territory, of business, professional or artistic activities, whether or not carried on in specific premises and whether or not specified in the tax tariffs». Mere carrying on: it taxes neither profit nor turnover but the fact of trading, so a loss-making activity accrues the same quota as a thriving one. What empties the tax is article 82. Its paragraph 1(c) exempts, in its first line, «individuals, whether or not resident in Spanish territory», and in its second, companies, civil partnerships and entities under article 35.4 of the General Tax Act with net turnover below one million euros. Between those two sentences they remove almost everyone who registers. What is left is a census obligation for everybody and a payment obligation for a minority.

2

The turnover that decides is two years old, and by a condition about a deadline

Rule 2 of article 82.1(c) does not say «the previous year». It says that for a corporation tax payer the figure is that «of the tax period whose filing deadline for those taxes had ended in the year before the accrual». Since the IAE accrues on 1 January and a year’s corporation tax return is filed at the end of the following July, the only period whose deadline ended during 2025 is 2024: the 2026 IAE looks at 2024 turnover. The same paragraph uses a different magnitude for a civil partnership or an article 35.4 entity, «the year before last preceding the accrual», which for a calendar year gives exactly the same answer by a different route. And there is a third detail that changes the answer for many small companies: rule 3 requires adding up all the taxpayer’s activities and, where it belongs to a group under article 42 of the Commercial Code, taking the group’s figure, «irrespective of any obligation to consolidate the accounts».

3

The two years of grace at the start, and the clause that closes them

Article 82.1(b) exempts anyone starting an activity «during the first two tax periods of this tax in which it is carried on», regardless of turnover. And article 89.1 makes the first period run from the starting date to 31 December of that same year, so starting in November spends a whole period in two months. The second paragraph of (b) is the one nobody quotes and the one that decides the interesting cases: «the start of an activity shall not be considered to have occurred where it has previously been carried on under different ownership», and it expressly names mergers, demergers and transfers of lines of business. A new company that absorbs a business that already existed starts nothing for IAE purposes.

4

How the bill is built: four multipliers and only one of them is national

The tariff quota comes from the heading, and the headings live in Legislative Decree 1175/1990, which still prints them in pesetas thirty-six years on. On that figure a weighting coefficient is applied «in every case» under article 86, running from 1.29 to 1.35 according to turnover. Then come the two local multipliers, and here is the detail almost no guide respects: article 87.1 applies the location coefficient «to the quotas modified by the application of the weighting coefficient provided for in the preceding article», and article 134.2 makes the provincial surcharge fall «on the municipal quotas modified by the application of the weighting coefficient provided for in article 86». Both multiply the same base. They are not chained. Writing tariff times weighting times location times one plus the surcharge, which is how almost every summary presents it, overcharges every time the location coefficient exceeds 1.

5

Two deadlines that are one month and two that are the month of December

Royal Decree 243/1995 splits the tax’s census returns across three articles and does not give them the same deadline. Article 5.3, in its first paragraph, gives one month from the start of the activity to register a new business. Article 6.4 gives one month from the triggering event for any variation. But the second paragraph of article 5.3 places the registration of anyone who «ceases to meet the conditions required» for an exemption «during the month of December immediately before the year in which the taxpayer becomes liable to contribute», and article 7.4 says the mirror image for the deregistration of anyone becoming exempt. So a company that passes one million euros in 2024 learns it when filing its corporation tax return in July 2025, has the whole of December 2025 to register, and starts paying on 1 January 2026. That registration goes on form 840, unless its municipality has delegated census administration: then it is whichever form the delegated body determines, under paragraph 2 of article 8 of the same regulation.

6

The quarter you open in and the quarter you close in are both paid

Article 89.2 makes quotas non-reducible except in two cases, and both round in the Treasury’s favour. On registration, where the start does not coincide with the calendar year, quotas «shall be calculated in proportion to the number of calendar quarters remaining until the end of the year, including that of commencement». On deregistration, they are apportionable by calendar quarters «excluding the one in which the cessation occurs», and the refund of the quarters not traded has to be requested. Added together, an activity that opens on 15 September and closes on 15 October pays two whole quarters for one month of life. And the refund does not arrive by itself: the article says taxpayers «may request the refund», not that it shall be repaid.

Worked example

The calculator’s opening state is a company with 1,200,000 euros of net turnover asking about its 2026 IAE. The answer is that it does pay, that the figure deciding it is the 2024 one, and that registration is filed in December 2025. Switch the type of taxpayer to an individual and the answer becomes «no, exempt» with no other figure mattering. In the second mode, with the tariff quota for heading 501.1 in a town of more than 500,000 inhabitants, which is 105,570 pesetas or 634.49 euros, and turnover of three million, the article 86 weighting coefficient is 1.29 and the weighted quota 818.49 euros. That is also the total while the council and the provincial authority have legislated nothing, which is what the calculator starts from. Now suppose your municipal by-law sets a location coefficient of 2.0 and your provincial council a surcharge of 35%: the municipal quota rises to 1,636.98 euros, the provincial surcharge is 286.47 euros and the total is 1,923.46 euros. Chaining the two multipliers, which is what almost everyone does, gives 2,209.93 euros. The difference, 286.47 euros, is exactly the surcharge charged twice.

Frequently asked questions

Does a Spanish sole trader pay the IAE?
No, if they are an individual. Article 82.1(c) of the consolidated Local Government Finance Act exempts «individuals, whether or not resident in Spanish territory», and that sentence carries no threshold, no time limit and no condition: a sole trader does not pay the IAE even billing five million euros. What they do have is a heading, because census registration is a different thing from payment. The exemption arrived with the 2002 reform and since then the tax has in practice been a tax on medium and large companies.
Then what is my IAE heading for if I pay nothing?
To classify the activity, and that classification is used outside the tax. The heading is declared on form 036 or 037, appears in the register of traders and professionals, determines whether the activity is a business or a professional one for income tax withholding, and is what decides whether an invoice carries withholding. Rule 3 of the Instruction makes that split: section 1 activities are business ones and section 2 activities professional, on condition that they are carried on by individuals.
When does a Spanish company start paying the IAE?
When two things come together. First, that the two exempt tax periods of article 82.1(b) have passed, counted from the year of registration and with the first one possibly lasting only a few months. And second, that net turnover reaches one million euros. The figure looked at is that of the period whose filing deadline ended in the year before the accrual, so there is a two-year lag: the first 2026 bill is decided by what was billed in 2024.
I have passed one million euros. When do I have to register?
In December of the year before the one in which you start contributing, not in the month after crossing the threshold. The second paragraph of article 5.3 of Royal Decree 243/1995 puts it this way: the return is filed «during the month of December immediately before the year in which the taxpayer becomes liable to contribute for the tax». It is the same deadline, in reverse, that article 7.4 gives for the deregistration of anyone becoming exempt. Both are in December, while registering a new activity and any variation have one month.
How is the IAE quota calculated?
You start from the heading’s tariff quota and multiply by the article 86 weighting coefficient, which runs from 1.29 to 1.35 according to turnover. Two local multipliers then act on that weighted quota, and they act in parallel rather than in a chain: the article 87 location coefficient, set by the by-law between 0.4 and 3.8 according to the category of the street, and the article 134 provincial surcharge, which the provincial council may set at up to 40%. Both are applied to the same base, the weighted quota. Chaining them inflates the result.
Can I choose between a municipal, provincial and national quota?
Where the tariffs assign several classes to the same activity, yes, and the choice has a consequence rarely mentioned. The second paragraph of article 85.3 forbids applying to provincial and national quotas both the location coefficient and the provincial surcharge. So moving to a national quota not only allows trading throughout Spain without paying one quota per municipality: it removes two of the four multipliers at a stroke. And article 6.1 of Royal Decree 243/1995 treats the change as a variation whose effects begin in the following tax period, unless deregistration and registration are filed instead.
What is the location coefficient and how much can it raise my bill?
It is the multiplier a council uses to weight the street the premises are on. Article 87.2 bounds it between 0.4 and 3.8, article 87.3 requires between two and nine categories of street, and article 87.5 requires two consecutive categories to differ by at least 0.10. Between the low and the high extreme there is a factor of 9.5 on the same weighted quota, decided by the pavement. And article 87.4 adds a whole case: in a municipality where more than one category of street cannot be distinguished, no location coefficient may be established.
Is a quota paid for each premises?
Yes, and one for each activity too. Rule 10.3 of the Instruction says it in two consecutive sentences: if the same activity is carried on in several premises, as many municipal quotas are paid as there are premises, and if several activities are carried on in the same premises, as many quotas are paid as there are activities, «even though they belong to the same person or entity». That is why the IAE weighs far more on a chain with twenty shops than on a company of the same size with a single site.
Is there any relief for starting out?
There are two and they are not the same. Article 88.1(b) grants, «in every case», a 50% relief during the five years following the end of the second tax period, but only to someone starting a professional activity. For a business activity the equivalent relief is in article 88.2(a), is up to 50% and exists only «where the municipal by-laws so provide». Same situation, same five years, and one is a right throughout Spain while the other depends on the council. It is worth reading the by-law before counting on it.
I am closing mid-year. Do I get part of the quota back?
Part of it, and only if you ask. Article 89.2 makes quotas apportionable by calendar quarters on deregistration, but «excluding the one in which the cessation occurs», so the quarter you close in is paid in full. And the refund of the remaining quarters is not automatic: the rule says taxpayers «may request the refund». You also have to file a deregistration return within one month of ceasing, under article 7.2 of Royal Decree 243/1995.

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Author: Thorben Rasmus Idel · Reviewed by: Nahar Geva · Last reviewed: