In order to start talking about the Tax on Economic Activities (IAE) we must first understand the concept and know to whom it applies. This tax is part of the Spanish Taxation system that is handled by the local entities, that is to say, the Town Halls.

The IAE is applied to both the natural persons and legal entities that carry out a business activity as an artist or professional, within the Spanish territory.

It might be that you are exempt from this tax. How to know? Whenever you comply with one of the features that we will comment below:

• The natural persons, that is, the self-employed that do not form part of any trade company, although this tax might affect them if a Community of Assets has been created or a Civil Company.
• The first two years of the activity of self-employed and companies, are exempt from paying this tax.
• After those two years, so the third year, you will have to pay this tax if your activity during the first year exceeded the turnover of 1.000.000 €.
• This last paragraph will also be applicable for taxpayers non-residents in Spain but who operate within the Spanish territory, whenever their turnover exceeds 1.000.000 euros, they will be obliged to pay this tax.

The sum corresponding to the Tax on Economic Activities (IAE) to be paid depends on several factors, such as the facilities where the business is conducted, the location of the activity, and as mentioned before it is competition of the local authority where the activity is developed.

Are you hesitating whether to register, the sum may also vary in function of several circumstances, depending of the region where the activity is being carried out or the features of the business activity, including the establishment where it is carried out. They take into account for example the square meters of the premises, the total number of employees that form part of the company and the maximum amount of kilobytes, amongst others.

To register and unregister, you must fill in form 036, and those obliged to pay this tax, must fill in form 840. Were you in the first place exempt from paying this tax, but your circumstances changed and your do no comply any more with the requirements to stay exempt, for example for having exceeded 1.000.000 € in your activity, you must notify this as well, in model 840, as  you are not exempt any more.

At Welex, we are specialized in handling this kind of formalities and any other that is related to your trade company’s activity or accountancy or tax issues. Do not hesitate to contact us now for professional help in these issues.