2 July, 2014

For and Against the Spanish Tax Reform

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On June 23, the Spanish Ministry of Finance made public the text of the draft Laws modifying Personal income tax, Non-residents income tax, Corporate tax, VAT, Special taxes and the General Tax Law.

A tax reform that had been announced as capable of decreasing the tax pressure suffered in the most recent years. From the reading of the Texts, not all the news seem to be good news.

The measures contained in the Draft text are still provisional, as they have to be approved by the Spanish Parliament.

The reform is based on a reduction of the Spanish taxpayers’ tax burden. Such reduction is achieved with lower tax rates in Personal income tax and with the Corporate income tax rate reduction from 30 to 25%.

However, part of the changes affecting Personal income tax, for example, will imply an increase of the taxable base, with the aim of sustaining public expenditure.

Such changes include the review of the exemption applying to severance payments (although the exemption is maintained for salaries up to 20,000.00 €), the elimination of the exemption related to the granting of company shares to the employees or the reduction from 40 to 30% of the reduction applying on income obtained in a period exceeding two years (for example, an extraordinary bonus) or to income qualified as irregular in time.

A tax reform that, as it stands, may not cover all of our expectations, as not all of its measures are in favour of the taxpayer.

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