Running a company in Spain can mean several layers of tax on the same profit: corporate tax, dividend taxation, wealth tax and the solidarity tax. Here is how Spain and Cyprus compare for founders.
Spain's corporate tax, savings tax, wealth tax and solidarity tax compared with Cyprus corporate tax and non-dom residency.
Running a company in Spain can mean paying tax on the same profit in several layers: corporate tax when the company earns it, savings tax when you distribute it, and, for higher net worth, an annual wealth tax and the solidarity tax on top. Cyprus taxes that profit once at 15% and, for non-domiciled residents, leaves dividends almost untouched. Here is how Spain and Cyprus compare for a founder.
Spain vs Cyprus: the headline numbers
| Tax | Spain | Cyprus |
|---|---|---|
| Corporate income tax | 25% | 15% |
| Tax on dividends to the owner | 19% to 28% savings tax | 0% for non-dom residents (2.65% GHS, capped) |
| Wealth tax | Yes, regional, up to ~3.5% | No |
| Solidarity tax on large fortunes | 1.7% to 3.5% above 3m euros | No |
| Capital gains on share sale | Taxed as savings income | Exempt (unless Cyprus real estate) |
The four layers of tax in Spain
A Spanish company pays 25% corporate tax on its profit. That is the first layer.
When the profit is distributed, the dividend is taxed as savings income on a progressive scale: 19% up to 6,000 euros, rising through 21%, 23% and 27% to 28% on the highest amounts. That is the second layer.
For founders with significant assets, two more layers can apply:
- Wealth tax, charged annually by the autonomous regions on net worth, with rates that reach around 3.5% in some regions.
- The solidarity tax on large fortunes, a state tax on net wealth above 3 million euros, at 1.7% to 3.5%, which runs alongside the regional wealth tax.
The wealth tax and solidarity tax apply to your asset base every year, not just to income. For a founder holding company shares, property and investments, these layers can take more over time than the income taxes do.
How Cyprus taxes the same profit
A Cyprus company pays 15% corporate tax. After that:
- No withholding tax applies to dividends paid to non-residents.
- A non-domiciled Cyprus tax resident pays no income tax or Special Defence Contribution on dividends.
- The only charge on the dividend is the General Healthcare System contribution at 2.65%, capped at 180,000 euros of annual income.
Cyprus has no wealth tax, no solidarity tax and no inheritance tax. There is no capital gains tax on a share sale unless the company holds immovable property in Cyprus.
What actually changes the outcome
Cyprus and Spain offer very different frameworks. The outcome depends on where you are tax resident, whether the company has genuine substance in Cyprus, and how your personal assets are held. A Cyprus company does not help a founder who stays Spanish tax resident, and Spanish CFC rules can tax a low-taxed foreign company in the owner's hands.
Moving from Spain to a Cyprus structure
A move has to be planned before it happens. Spain's exit tax can apply to unrealised gains on large shareholdings when a person ceases to be Spanish tax resident. Becoming Cyprus tax resident, ending Spanish tax residence cleanly, and building real substance in Cyprus are what make the structure hold up.
If you run a Spanish company and are weighing Cyprus, start with a review of your tax residence, your assets and the timing. Contact us to discuss your situation, or read our guide to Cyprus tax residency and non-dom status.
Frequently Asked Questions
What is the corporate tax rate in Spain?
Spain's general corporate income tax rate is 25%. Cyprus charges 15%. Spain also taxes distributed profit again through savings income tax, and high-net-worth individuals can face wealth tax and the solidarity tax.
How are dividends taxed in Spain?
Dividends are taxed as savings income on a progressive scale from 19% up to 28% for the highest amounts. Cyprus non-dom residents pay no tax on dividends, only the General Healthcare System contribution of 2.65%, which is capped.
What is Spain's solidarity tax?
The temporary solidarity tax on large fortunes applies to net wealth above 3 million euros, at rates from 1.7% to 3.5%. It runs alongside the regional wealth tax. Cyprus has neither a wealth tax nor a solidarity tax.
Can a founder in Spain use a Cyprus company?
Yes, with genuine substance in Cyprus and proper planning of personal tax residency. Spanish CFC and exit-tax rules can apply, so the structure should be reviewed before any change.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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