Microcompanies Will Be Taxed Below Large Corporations for the First Time

Microcompanies, namely those with annual revenues below one million euros and which account for nearly 89% of the Spanish business fabric, will for the first time this year be subject to a lower tax rate than large corporations.

The latest tax measures promoted by the Spanish Government and scheduled to enter into force on 1 January 2025 will significantly reshape the corporate tax landscape. According to the report Corporate Tax Return 2025, presented by the Spanish Registry of Tax Advisors of the General Council of Economists (REAF-CGE), smaller companies will move to effective tax rates ranging between 19% and 21%, while large corporations will face an average tax burden of 20.8%.

However, figures corresponding to 2023 still reflect a heavier tax burden for smaller businesses: microcompanies faced an average rate of 22.37%; small companies, 22.97%; and medium-sized businesses, 22.02%.

SMEs with annual revenues between one million and ten million euros will still need to wait until 2029 before their effective taxation falls below that of large corporations.

Regarding microcompanies — those with revenues below one million euros — the reform introduces a gradual reduction in Corporate Income Tax rates. In 2025, the applicable rate will be 21% on the first €50,000 of taxable income and 22% on the remaining amount.

In 2026, taxation will decrease to 19% on the first €50,000 and 21% on the excess. Thereafter, between 2027 and 2029, rates will remain at 17% on the first €50,000 and 20% on all profits exceeding that threshold.

As for SMEs, the reduction schedule will also be progressive: the tax rate will stand at 24% in 2025, decrease to 23% in 2026, fall to 22% in 2027, drop to 21% in 2028, and finally reach 20% in 2029.

For the 2025 Corporate Income Tax return, one of the main tax incentives available to companies will be a 20% reduction for businesses allocating profits to reserves aimed at strengthening their financial structure.

Companies increasing their equity may apply this reduction provided such funds are maintained for a minimum period of three years. Furthermore, if the company increases its workforce, the tax incentive will be even greater: the reduction will rise to 23% where employment growth ranges between 2% and 5%; to 26.5% where workforce growth is between 5% and 10%; and to 30% where the increase exceeds 10%.

In the specific case of microcompanies, this benefit may reach up to 25%.

Spain currently has approximately 1.68 million companies. Of these, around 1.49 million — approximately 89% — are microcompanies with revenues below one million euros.

Meanwhile, 9.55% correspond to small and medium-sized companies with revenues between one and ten million euros, whereas only 1.4% are large corporations with annual turnover exceeding ten million euros.

The report also highlights that 67% of Spanish companies are concentrated in Madrid, Catalonia, Andalusia and the Valencian Community.

During the presentation of the report, REAF President Agustín Fernández criticised the limited advance notice provided by the Spanish Tax Administration regarding the information companies require in order to prepare their Corporate Income Tax returns.

According to Fernández, the Spanish Tax Agency makes tax data available to taxpayers far too late, thereby complicating the work of tax advisors. He also pointed out that the Ministerial Order regulating the new filing form for this year’s tax return has still not been approved.

In a context of constant tax changes and progressive reductions in Corporate Income Tax rates, it is essential for businesses to properly structure their tax strategy in order to optimise taxation and avoid future tax contingencies.

At ILIA ETL GLOBAL, we assist microcompanies, SMEs and corporate groups with tax planning, Corporate Income Tax optimisation, and the application of tax incentives and deductions.

Our specialised teams combine the capabilities and resources of an international group with the proximity and direct approach of an independent firm, providing comprehensive and fully tailored advice to each company.