How does IVA work?
As in the UK and most European countries, a sales tax is added to the price of almost all goods and services. The final consumer bears this unless it’s a registered business that can offset the tax against the IVA it has invoiced to its own customers. The basic rate on almost everything is 16% though reduced rates of 7% and 4% also apply to certain products, and a few specific services are exempt. Is it tax advantageous to set up a company? This will depend on each individual’s tax situation. From 2007 a company pays a basic rate of 30% on taxable income, though the first €120K is subject to a reduced rate of 25% (and rates are expected to be reduced progressively over the next few of years). Taxable income is calculated after deducting relevant business expenses and allowances from the company’s income. Other taxes: I.A.E (Actividad Económica) – an annual, local business tax levied on all companies and businesses. From 2003 it will only apply to businesses with a turnover in excess of
