SMEs Pay €1,500/Year in Local Taxes & Fees in Spain
- Small and medium-sized enterprises (SMEs) in Spain face an average annual tax and municipal fee burden of €1,500, according to recent data.
- Now, Upta, a Spanish organization representing self-employed workers and SMEs, is calling for tax breaks for small businesses and the self-employed affected by municipal works.
- Prolonged restrictions stemming from municipal works can lead to an average 30% drop in revenue for small businesses, Upta reports.
Small and medium-sized enterprises (SMEs) in Spain face an average annual tax and municipal fee burden of €1,500, according to recent data. These costs include the local property tax (IBI) – rates varying by city, with Madrid at 0.98%, Barcelona at 0.66%, and Valencia at 0.58% – commercial waste collection fees (averaging €310 annually in Madrid and €243 in Valencia), municipal licenses (ranging from €800 to €3,000 in Madrid, around €1,300 in Barcelona, and averaging €1,260 in Valencia), and public space occupation fees (around €50-€70 per year). These local levies add to existing regional and national tax obligations.
Now, Upta, a Spanish organization representing self-employed workers and SMEs, is calling for tax breaks for small businesses and the self-employed affected by municipal works. The organization argues that a sustained decline in revenue – caused by disruptions from construction and infrastructure projects – coupled with the inability to reduce structural costs, puts the viability of many small businesses at risk. To address this, Upta plans to push for a motion in 8,132 municipalities across Spain to incorporate economic compensation measures for affected businesses.
Prolonged restrictions stemming from municipal works can lead to an average 30% drop in revenue for small businesses, Upta reports. These works typically last around six months, during which businesses must continue to meet their tax and other periodic cost obligations, threatening their economic sustainability.
Proposed Compensation Plan
Upta has developed a Municipal Compensation Plan designed to benefit small businesses and self-employed individuals whose annual turnover has decreased by 20% or more during the duration of municipal works. The plan stipulates that losses must be directly related to the works and that beneficiary companies must be up to date on their tax payments to the municipality.
The proposed plan, submitted to over 8,000 municipalities, envisions direct economic compensation ranging from €500 to €1,000 per affected establishment. It includes minimum tax breaks of 50% on municipal taxes such as the property tax (IBI), the economic activities tax (IAE), and the tax on construction, installations and works (ICIO) – if any such works are necessary as a result of the municipal projects – as well as the vehicle tax (IVTM) for vehicles used in the business.
The plan also proposes reductions in waste collection and commercial waste fees, public space occupation fees (for terraces, displays, etc.), municipal licenses, and loading/unloading fees, as well as other taxes directly linked to economic activity.
Upta proposes two methods for implementing the exemptions: direct reductions on municipal bills, applying the corresponding reduction to taxes and fees during the affected period, or a refund of amounts already paid during the year, upon request and verification of eligibility.
The proposed aid is designed to be compatible with other support measures offered by different public administrations, including regional or national subsidies aimed at compensating for economic losses or maintaining business activity. These tax breaks can be supplemented by other municipal aid not directly linked to taxes and fees, provided their nature and purpose do not duplicate existing subsidies.
The Municipal Compensation Plan will be funded by a specific allocation in the municipal budget for the current and following year. The plan can be expanded based on the number of approved applications in the previous year.
If approved, the plan will take effect retroactively from , and remain in effect until the completion of the works and the recovery of normal economic activity.
The move comes as Spain continues to navigate a complex economic landscape, with SMEs representing a significant portion of the country’s economic output. The proposed compensation plan reflects a growing awareness of the challenges faced by small businesses in the face of infrastructure development and the need for targeted support to ensure their continued viability. The corporate tax rate in Spain currently stands at 25%, with potential reductions for SMEs and micro-enterprises beginning in , implemented progressively over several years. For micro-enterprises with a net turnover of less than €1 million in the previous tax period, rates will be reduced to as low as 17% by 2028. These changes, combined with the proposed municipal compensation plan, aim to create a more favorable business environment for SMEs in Spain.