Economy of Spain

Exports & Imports

Spain is a major exporter of goods and services, ranking 19th globally. Key exports include vehicles, machinery, chemicals, food and beverages, and tourism services. France, Germany, and Italy are its top trading partners. Imports primarily consist of machinery, energy products, and chemicals. Spain typically maintains a positive trade balance, with exports exceeding imports.

Balance of Trade

While Spain traditionally enjoys a trade surplus, recent global economic trends pose some challenges. Rising energy import costs could put pressure on the positive balance. The government is taking steps to diversify import sources and promote domestic manufacturing to maintain a healthy trade balance.

Infrastructure Development

Spain boasts a well-developed transportation network. The country has over 150,000 kilometers of paved roads, including a comprehensive network of highways and expressways. Spain prioritizes infrastructure development, with ongoing projects in high-speed rail, ports, and renewable energy infrastructure.

Fiscal Policy

Spain employs a progressive fiscal policy. The government uses a combination of spending and taxation to influence economic activity. Government spending focuses on social programs, infrastructure development, and job creation initiatives. Tax revenue is the primary source of government income, with a progressive income tax structure ensuring wealthier citizens contribute a larger share.

Monetary Policy

As a member of the European Union, Spain adheres to the monetary policy set by the European Central Bank (ECB). The ECB primarily uses interest rate adjustments to control inflation and stimulate economic growth across the Eurozone. Spain has limited control over its own monetary policy but can influence economic activity through fiscal policy.

Trade Agreements

Spain benefits from being part of the European Union's extensive trade network. EU trade agreements eliminate or reduce tariffs and trade barriers with many countries, promoting international trade for Spanish businesses. Spain also has bilateral trade agreements with additional countries outside the EU.

Environmental Regulations

Spain has implemented stricter environmental regulations in recent years to address air and water pollution concerns. The government enforces regulations on emissions standards for vehicles and industries. Spain is also actively investing in renewable energy sources like solar and wind power to reduce its reliance on fossil fuels.

Tax System in Spain

Capital gains tax: Capital gains tax rates in Spain vary depending on the asset and the taxpayer's residency status. (i) For residents: Capital gains from the sale of most assets held over one year are taxed at a flat rate of 19%. However, higher rates (up to 28%) may apply for shorter holding periods or specific assets. (ii) For non-residents: A flat rate of 24% typically applies to capital gains from Spanish assets.
Corporate tax rate: The standard corporate tax rate in Spain is 25%. However, lower rates may apply to certain types of businesses or activities.
Sales tax (Value Added Tax - VAT): Spain has a Value Added Tax (VAT) system with different rates depending on the good or service: (i) Standard VAT rate: 21% (applied to most goods and services) (ii) Reduced VAT rate: 10% (applied to specific items like food, beverages, and transportation) (iii) Super-reduced VAT rate: 4% (applied to essential items like basic foodstuffs, medicine, and books),
Property tax (IBI): Property tax in Spain, known as Impuesto sobre Bienes Inmuebles (IBI), is levied by local municipalities and rates vary depending on the property's value and location. Typical rates range from 0.4% to 1.3% of the property's cadastral value.
Payroll tax: Social security contributions in Spain are funded through a payroll tax system.
Tax deductions and credits: Spain offers some tax deductions and credits to reduce tax liability.
Tax compliance: Tax compliance in Spain has improved in recent years, but there are still efforts underway to further strengthen tax administration.
Tax burden: The overall tax burden in Spain is considered moderate compared to some developed countries. The government aims to balance revenue generation with fostering a business-friendly environment.