Do inactive companies pay taxes in Spain?

This hot topic can quickly become a huge issue.

When starting a business, we often don't consider what happens if we cease our activity. You might think that tax obligations automatically end.

However, an inactive company still has fiscal and administrative responsibilities that you're expected to fulfill if you want to want to avoid fines and fees.

Don't worry. We've listed the obligations that remain for inactive companies in Spain, to help understand whether they’ll pay taxes.

Inactive companies are ones that don’t engage in any economic activity. However, the lack of activity doesn’t mean it’s been liquidated or dissolved.

In fact, according to the Agencia Tributari (Spain's tax agency [link in Spanish]):

Additionally, inactivity can be due to various reasons: restructuring, economic difficulties, temporary strategic decisions...

In any case, the legal and fiscal responsibilities continue as long the company hasn’t been a dissolved and liquidated.

As we mentioned, even if your business isn’t operational, you have fiscal and administrative responsibilities, regardless of whether your company’s large or small.

You’re required to pay - even if you’re self-employed - as you can see in our article on typical costs of freelancing in Spain.

In principle, you’ll face the following obligations:

Inevitably, you’ll have to file corporate tax. The box to fill in these cases will indicate that you’ve had no commercial activity, but filings are still mandatory to inform the tax authorities of your situation, allowing them to verify it.

For freelancers, this tax doesn’t disappear, but it changes. Freelancers are taxed through the IRPF (Impuesto sobre la Renta de las Personas Físicas). If you need more info, you learn more with the IRPF glossary (in Spanish) we've created.

Inactive companies aren’t exempt from filing VAT returns (which apply to the sale of goods and services). You’ll always need to file the quarterly 303 form, and you can also deduct VAT on previous operations even if your company isn’t active. In this respect, using a VAT calculator might be useful.

Inactive companies must continue to file their annual accounts with the commercial register.

These include:

• a balance sheet,
  
  
• profit and loss account,
  
  
• statement of change in equity,
  
  
• notes linked to financial statements.

Filing these accounts lets official bodies and interested third parties - such as partners and creditors - better understand the business's financial situation. Failing to comply could provoke financial penalties.

You’re obliged to communicate your inactivity to the tax agency with a 036 form, known as the census declaration. In it, you share information about the business's characteristics, operations, tax address, and census status. In fact, as we mentioned earlier, it’s the way to communicate that you aren’t operating. So, filing it properly will avoid potential misunderstandings/penalties.

Finally, in general, you have two more obligations to fulfill as an inactive company:

• Keep your registered office active and up to date in the official Commercial Register.
• Keep your digital certificate updated, as it’s essential for electronic operations with the administration and other bodies.

This second obligation’s essential these days, as the government’s currently implementing digital electronic invoicing.

Failing to comply with fiscal and administrative obligations can quickly invoke penalties. These can be a hassle if you plan to reactivate the company or liquidate it in the future.

Possible penalties:

• financial fines depending on the infraction and its severity,
  
  
• late-payment interest fees imposed by the tax agency,
  
  
• bank accounts being blocked until the situation’s been regularized,
  
  
• loss of tax benefits.

We often get asked how long a business can stay inactive.

Really there’s no specific time limit, it’ll depend on the company's strategy and circumstances. However, we recommend to continuously monitor your obligations to make sure you’re constantly on top of the current regulations.

Additionally, you should note that maintaining your inactive company has certain associated costs... and, although they might be lower than typical costs of an operational company, you still have to pay them.

In this regard, there are several main and fixed expenses:

• Tax filings: At Qonto, we know in detail what taxes a company pays in Spain. That's why we can tell you that, despite inactivity, you will likely need a manager or tax advisor to file your returns.
  
  
• Commercial registers: These are costs derived from filing annual accounts.
  
  
• Digital certificate: Expenses related to maintaining and renewing your “digital certificate” in Spain.
  
  

So, on average, you might face costs between €500 and €1,000 annually to maintain your inactive company, following a breakdown like this:

These costs vary depending on the company's size, the complexity of operations, advisor fees... Also, since taxes for SMEs in Spain differ from those for large companies (as well as management norms), processing and filings change. Still, what's listed in the table above covers the common costs for all types of Spanish businesses / enterprises.

Whether it’s due to inactivity, costs, or any other reason, if you think that keeping your business active isn’t viable, you can close the company with this step-by-step process:

1. Cease activity: File a 036 form to inform the Tax Agency of the definitive cessation of activity.
   
   
2. Dissolve the company: This must be agreed upon in a general shareholders' meeting, and the dissolution act must be drafted.
   
   
3. Liquidation: Create a liquidation inventory, pay any outstanding debts (and request a liquidation certificate to prove it), then distribute the assets.
   
   
4. Termination: Register the company's termination in the official Commercial Register.
   
   

Dissolution and liquidation must be well-structured and compliant with all legal requirements to avoid any future problems.

To prove that your company’s inactive, keep your documentation in order and up to date. This includes filing declarations or documents that may be requested by the Tax Agency or the Commercial Register during any inspection or requirement. Typically, they may ask for:

• VAT and corporate tax returns, even if they’re zero,
  
  
• a 036 form, which communicates inactivity to the tax agency,
  
  
• annual accounts filed with the commercial register reflecting inactivity,
  
  
• communications with suppliers and clients that demonstrate the lack of operations.

An inactive company still has fiscal and administrative obligations that must be met to avoid penalties and problems. Although economic activity has ended, the business still legally exists and still has responsibilities.

If you’re self-employed, a micro-enterprise, an SME, or a startup and have questions about anything related to an inactive company, at Qonto we’re here to simplify your fiscal and administrative management. Our solutions will help you keep your business compliant.