Most of the income forecast by the Government in its budgets comes from the taxes it collects. The main purpose of taxes is to provide the Government with the economic resources it needs to offer the services required by society.

A distinction can be drawn between two types of tax, depending on whether or not the taxpayers receive something in return for the money they pay:

  • Rates
  • Taxes


When a public institution offers someone a service that provides them with goods or services directly, they are said to be paying a rate. Some examples: rates for refuse collection, rates for use of sports complexes, rates for enrolment in the public university...


Taxes are paid to the government by taxpayers without directly receiving anything in return.

Taxes can also be classified by how much the percentage varies depending on the income; so for example:

  • Regressive taxes: the greater the income or wealth, the smaller the percentage of tax paid.
  • Progressive taxes: the greater the income or wealth, the higher the percentage of tax paid. This group includes, for example, Private Income Tax, Wealth and Large Fortune Tax and Inheritance and Gift Tax.
  • Proportional tax: the percentage of tax paid does not vary, no matter how high or low the income or wealth. This group includes, for example, Company Tax.

Types of taxes

There are two types of tax: Direct Taxes and Indirect Taxes.

Direct Taxes

These taxes are paid directly by individuals or companies under any of the following circumstances:

  • Having made a profit: for example, in a business; or incomes coming from work (salary & wages); or from using some good owned by them (for example, the hiring of a dwelling).
  • The possession of patrimony: for example, the ownership of a building (dwelling, office…).

Among these, the most important are:

  • Private Income Tax (PFEZ)
  • Company Tax (SZ)
  • Real Estate Tax (OHZ)
  • Inheritance and Gift Tax (ODZ)
  • Wealth Tax (OZ)

Indirect taxes

These taxes are applied to people's income or assets, the consumption of certain services and transfers and/or changes in ownership in certain goods (wealth circulation or use). Among these, the most important are:

  • Value Added Tax (VAT)
  • Tax on Capital Transfers and Documented Legal Acts (ITP/AJD)
  • Excise Duty

Time to get working!