Tax Summary

Anglo-Spanish Chartered Accountants

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In Summary

Having considered a few examples that illustrate ordinary business transactions, this example would lead to the following:

  • Quarterly tax returns with payment of taxes amounting to €453.
  • Reported profit amounting to €300.

Thus the commonly mistaken conclusion of taxes being high in Spain, as many puzzled entrepreneurs wonder how it is possible to pay €453 euros worth of tax when the profit was only €300.

The answer to that question can be seen below:

 

Balance Sheet      
  Profit Bank VAT Creditor IRPF Creditor
 
Sales 3,000 3,480 480 0
Expenses -200 -232 -32 0
Rent -1,000 -980> -160 180
Services -1,500 -1,515 -240 225
  300 753 48 405

 

  • The profit was €300 but the actual net cash inflow from operations was €753.
  • The excess €453 was collected on behalf of the tax office which of course has to be paid when the period comes to an end.

Of course, in practice, it is never this simple. Businesses can face cash flow shortages for a number of reasons and when the taxes collected are not ring-fenced making the appropriate payments can be very difficult indeed.

 
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