Relocation of economic activities for tax reasons

Numerous relocations of companies and professionals have taken place in Spain recently. 

This phenomenon of companies’ relocation for tax reasons could be considered as the tax emigration of our companies.

One of the main reasons for this relocation lays in the Spanish taxation system for companies, in an environment where Public Authorities indebtedness has risen from 37% of GDP in 2007 to 99% of GDP in 2015.

This means that when a Spanish company moves its centre of activities to a country like Andorra, Ireland, Malta or Cyprus, its taxation falls from 28% (2015) to 12.5% in the cases of Ireland and Cyprus, to 10% in the case of Andorra and to 5% in the case of Malta.

However, a true relocation of activities, which imply both labour and hiring contracting in the country of destination, is requested for a relocation to be effective.

This relocation is clear evidence that the Spanish Public Administration managers need to accept what being part of a competitive world means, that is that not only companies but also countries compete with each other.

A disproportionate current expense in a country means an increase of its tax burden, which finally affects its citizens. And it is a big mistake to believe that neither the citizens nor the companies may take decisions on what it is more convenient for them.