Spain Business Activity Tax Calculator 2026 (IAE)

The Business Activity Tax (Impuesto sobre Actividades Económicas — IAE) is a direct, real tax in Spain whose taxable event is the mere exercise of business, professional, or artistic activities within the national territory. It is regulated by the Local Finances Act (RDL 2/2004) and Royal Legislative Decree 1175/1990. Although all businesses and self-employed individuals must register under the appropriate activity code (Epígrafe), the law provides a general exemption for all individual sole traders (autónomos) and any company with a net annual turnover under €1,000,000. Consequently, IAE is primarily paid by medium and large companies in Spain.

🔍 Who is exempt from paying IAE?

The following are fully exempt from paying the IAE tax:

• All self-employed individuals (personas físicas / autónomos)
• Any company or corporate entity with a net annual turnover under €1,000,000
• Non-resident entities operating through a permanent establishment in Spain, provided their net turnover is under €1,000,000
• Public research organisations, state educational bodies, and charity associations covered by special tax regimes

[!NOTE] The turnover threshold for the exemption is based on the second preceding fiscal year (for example, to determine whether a company is exempt from paying the tax in 2026, we review the net sales of the 2024 fiscal year).

📊 How is the IAE tax calculated?

For companies that exceed the €1 million threshold, the annual tax is calculated as:

Total IAE Tax = Base Quota * Municipal Coefficient (Population) * National Coefficient (Turnover)

1. Base Quota: The national baseline rate set by RDL 1175/1990 for each specific activity code.
2. National Coefficient: Determined by the company’s net turnover:
   • Between €1,000,000 and €5,000,000: 1.40
   • Between €5,000,000 and €10,000,000: 1.45
   • Above €10,000,000: 1.50
3. Municipal Coefficient: Set by each town hall depending on the population of the municipality or the category of the street where the activity is located (ranges from 1.4 to 3.8).

📝 Worked examples

Example 1: Small company with under €1,000,000 in turnover

Profile: A local transport company located in Valencia has an annual turnover of €850,000.

The company does not pay any annual tax. However, it must remain registered under its corresponding activity code since its incorporation.

Example 2: Wholesale distribution company with €1,500,000 in turnover

Profile: A wholesale trading company located in a municipality of 25,000 residents (municipal coefficient: 1.8). The net turnover in the second preceding fiscal year was €1,500,000. The activity code sets a base municipal quota of €350.

The company’s annual IAE tax liability is €882.00, billed by the local municipal tax authority.

⚠️ Common mistakes

1. Failing to register under the correct code: All businesses must select their activity codes (Epígrafes) using Form 036/037 when starting their business, even if they are exempt from paying the tax. The census registration and the tax exemption are separate concepts.

2. Not declaring the loss of exemption (Form 840): If a company’s turnover exceeds €1,000,000 for the first time, it must submit Form 840 to the tax office in December of the year before the tax becomes due, notifying them that it is no longer exempt.

3. Not updating premises details: The IAE is calculated separately for each physical establishment or office where the business is conducted. Failing to notify the tax office of closed premises can result in paying duplicate quotas.

❓ Frequently Asked Questions (FAQ)

ℹ️ IAE Tax Regulations