There are a number of taxes that should be considered in the context of clean energy investments in Spain:

  • Real Estate Tax ("Bienes Inmuebles de Características Especiales" or "BICES"), which is collected by Municipalities;
  • Installations and Worksites Tax ("Impuesto sobre Construcciones, Instalaciones y Obras" or "ICIO"), also collected by Municipalities; and
  • Transfer Tax ("Impuesto sobre Transmisiones Patrimoniales" or "RETT"), which is collected by Regional Governments.

BICES

BICES is based upon Spanish Land Registry Law ("Ley del Catastro Inmobiliario") which defines assets used for the generation of electric power, as well as gas, oil and nuclear power stations, as real estate. 

Therefore, it allows Municipalities to extend this real estate tax to power generating installations. The rate of this annual tax is between 0.4% to 1.3%.  The rate is applied to a municipal value of the real estate (so called "valor catastral" which is usually significantly below a fair market value). The tax is payable by the individuals or companies holding licenses to operate solar and wind farms.

Installations and Worksites Tax

Under Spanish Municipalities Tax Law, the carrying out of construction, an installation or a worksite within a Municipality where a license is required is a taxable event. The taxpayer is the individual or company owning the construction, installation or worksite.

The tax base consists of the real and effective cost of the construction, installation or worksite. In this respect, the cost is the material cost to the owner of executing the construction, installation or worksite.

Until 2010 it was unclear whether solar panels and wind turbines formed part of the tax base as case law in this area was conflicting.  However, in 2010 the Spanish Supreme Court decided that the tax base for Installations and Worksites Tax includes the cost of the installed equipment for three reasons: (i) the equipment is fixed to the land; (ii) the equipment is essential for the functioning of the construction/installation/worksite and cannot be function independently; and (iii) due to the granting of the license, the equipment must be comprised in the project.

Consequently, wind farms and solar panels fall within these characteristics and the cost of the wind turbines and solar panels are comprised in the tax base of the Installations and Worksites Tax.

Transfer Tax

Under Spanish Securities Market Law the transfer of securities is exempt of transfer tax unless Spanish immovable property directly or indirectly represents more than 50% of the value of those securities.

The tax base is the fair market value of the underlying immovable property and the tax rate is between 6% and 8% depending on the region.

The key consideration is whether the term "immovable" includes wind and solar farms equipment. Wind turbines and solar panels are characterized as immovable assets since the definition of immovable assets extends to installations of every kind established on a permanent basis, even where such premises are movable and the land where they are installed does not belong to the owner of the installation.

The Spanish tax authorities have also confirmed that wind turbines and solar panels are considered immovable property if they are part of a permanent installation. This will not be the case where such turbines and panels are not installed on land. In such circumstances they will be considered as moveable property and therefore the transfer of securities in an entity that holds uninstalled turbines and panels will not subject to the Transfer Tax.

Conclusion

Due to the wide definitions in use under Spanish tax law, particularly with regard to real estate, there are a number of direct and indirect taxes which can apply at the beginning, during the development or on the transfer of renewable energy investments in Spain.