The Spanish Government has recently approved the draft of the 2021 General Budget Law that has been sent to the Spanish Parliament for its final processing. Subject to the eventual changes that the text may suffer during its parliamentary procedure, it is worth analysing the tax measures that it contains as they anticipate what, in the words of the Spanish Minister of Finance, will imply an in depth tax reform. Needless to say that such reform shall be delayed up until the sanitary crisis is overcome and the economic stability is fully recovered.

Spanish Draft General Budget Law

The four objectives of these new regulations, underlined by the Minister, consist in “gaining progressivity, helping small and medium sized companies, supporting healthy behaviours and moving forward in green taxation”.

We highlight below the some of the tax measures that we deem it worth anticipating

✔ Spanish companies are entitled to apply a 100% exemption on dividends and capital gains derived from the holding of shares representing at least 5% of the subsidiary’s share capital that are held for a minimum one – year period.

With the new tax measures, it is foreseen that such exemption will be limited to 95% of the dividends / capital gains, thus implying an effective taxation of 1.25% for companies subject to the general standard 25% rate (5% on 25%).

During a three years period, such limitation will not apply on dividends obtained by Spanish companies with a turnover lower than 40 million euro, when they derive from a subsidiary, either resident or not, constituted after January 1, 2021.

✔ In the area of Personal income tax, general tax rates applying on the individual’s taxable income above 300,000 euro are increased in two percentage points. Tax savings rates are also increased in three percentage points on savings taxable income above 200,000 euro.

The annual limit to reduce the individual’s taxable income due to pension plan contributions is modified: a joint limit considering the contributions made by the employer and the individual raises from 8,000 to 9,000 euro while, when only individual contributions are made, the limit is reduced from 8,000 to 2,000 euro.

✔ The VAT rate applying on beverages containing sweeteners is raised to 21%. However, the 10% rate will remain when the beverage is purchased within a restaurant service.

✔ Individual’s Wealth tax is no longer considered of a transitory nature, that requires its annual extension, but it is kept for an indefinite time period while its marginal rate for wealth above 10 million euro is increased from 2.5% to 3.5%.

✔ In the area of Special taxes, the general rate on diesel increases, except for certain occupational fields. With the presentation of the Budget Law, the Spanish Government also announced that it plans to create a Special tax on non – reusable plastic packaging and another one on waste.

The Spanish 2018 Budget Law: at last!
The Spanish 2018 Budget law reduces the taxation of employees with a lower level of income and of taxpayers with a significant family burden and renews the Wealth Tax again. On July 04, the Spanish Budget law was published in the Official Gazette. In the area of taxes and, more concretely, with regards to Personal income tax, the Law looks into the consecution of the objectives inspiring the most recent tax reform, reducing the taxation of employees with a lower level of income and of taxpayers with major family burden such as women workers, large families or people with disabilities.

Wealth tax is once again renewed, hence, it will be due for 2018 by taxpayers exceeding the minimum exempt limits.

We highlight below some of the measures that are worth knowing.

✔ With the aim of reducing the tax liability of employees with a lower level of income, we outline the following measures:

  • The reduction up to 5,565.00 € on the net employment income for the purposes of determining the Payroll withholding tax basis, when such income does not exceed 16,825.00 € annually.
  • The increase of the limits exempt from Payroll withholding taxes and the establishment of new limits from Social security pensioners and individuals receiving unemployment benefits.

Thus and for the fiscal year 2018, a transitory system has been approved which differentiates the calculation of the reduction for withholding taxes accrued before or after the date of entry into force of the Budget Law, on July 05, 2018.

The regularization of the withholding tax due to these new regulations can be done, at the employer’s election, in the first employment income paid from July 05, 2018 or from August of the same year.

✔ From January 01, 2018, the maternity tax credit applying to working mothers with children younger than 3 years old, can be increased up to 1,000.00 additional € when the taxpayer with the right to such credit has paid, in the same fiscal year, childcare costs in a nursery school.

✔ In order to adapt Spanish 2018 Law to the EU regulations, a new tax credit has been introduced for Spanish taxpayers that cannot file a joint tax return when part of the family members are resident of another EU or European Economic Area country. Such tax credit aims at equalizing the tax quote payable with that which would have resulted if all the family members were residing in Spain.

✔ The reduction of taxes is always good news, despite the practical application of some of the new measures, such as those referred to the Payroll withholding tax calculations, adds further complexity due to the period in which these regulations have been adopted.

Tax improvements of the Spanish Budget Law LPGE 2017
In the area of taxation, this Law cannot create new taxes but it can modify the existing ones.

We strongly welcome, although with certain delay, to well – deserved measures oriented to a more tax – friendly jurisdiction.

The Spanish Budget law (LPGE) for fiscal year 2017 was finally approved and published on June 28 in the Spanish Official Gazette (BOE), entering into force on the next day.

In the area of taxation, this Law cannot create new taxes but it can modify the existing ones. It has, therefore, introduced new measures implying an improvement for Spanish taxpayers and of which we highlight the following ones relating to:

✓ Corporate income tax: the tax credit for investments in film production and audiovisual series is enhanced, for fiscal years starting as from January 01, 2017; and,
✓ Value added tax: the tax rate applying to live performances and to prescription eyeglasses frames is reduced from 21 to 10%.

✔ Tax credit for investments in film production and audiovisual series

The tax credit percentages are increased from 20 to 25% in the first million Euro and from 18 to 20% on the excess thereon.

The limits of the tax credit on the tax quote are increased from 50 to 60%, for cross – border productions financed by more than one EU Member State and to 70% for productions whose budget does not exceed 1 million Euro and directed by a new filmmaker.

The tax credit for expenses incurred in Spanish territory of foreign productions is increased from 15 to 20% and the limit of the tax credit for creative personnel is doubled to 100,000.00 € as well as the general limit which increases to 3 million Euro.

✔ Life performances
The VAT rate applying to life performances, including theatres, cirques, bullfighting event, concerts and life cultural performances, is reduced from 21 to 10%. This measure is introduced with the aim of promoting the access and dissemination of culture, hence satisfying the sector demand.

We remind you of the resolution of the General Directorate of Taxes dated on August 02, 2012, which clarified that the applicable VAT rate is that corresponding to the accrual date. Such date must, therefore, be observed in order to reduce the applicable rate in each transaction concerned.

We strongly welcome, although with certain delay, to well – deserved measures oriented to a more tax – friendly jurisdiction.

New measures in the Draft 2016 Budget Law
The Spanish Congress has recently approved the draft 2016 Budget Law.

It is expected that, by mid October, and before the dissolution of the Parliament because of the forthcoming general elections, the definitive text is approved.

Despite the contents of this Law are limited constitutionally, as it cannot create new taxes but it can modify them (providing another law foresees it), the following tax measures should be noted, as they affect matters that have been subject to constant changes.

Patent box: a new calculation method

As of July 01, 2016, the method to calculate this tax relief is modified to adapt it to the new EU and OECD agreements. The 60% reduction on the net income generated because of the grant or transfer of certain intangible assets is applied on the prorate between the expenses incurred by the legal entity in the asset creation in relation to the total expenses deriving from such asset:

Numerator = expenses directly related to the creation of the asset (including subcontracted). These expenses are increased by 30%, with the limit of the amount of the denominator.

Denominator = the same expenses of the Numerator and of the asset acquisition.

A transitory system is established for the grant of intangibles done prior to July 01, 2016, allowing the taxpayer to elect applying the original system. Such election must be exercised in the 2016 tax return.

Net worth tax again

This tax is, once again, temporarily restored.

We remind you that Net worth tax was eliminated as of Jan. 01, 2008. However, the regulations were not abolished at that time, but a 100% tax relief was approved (together with the elimination of formal requirements such as filing the tax return).

With the aim of contributing to the consolidation of public finances, the 100% tax relief will be re-established as of Jan. 01, 2017.

Miscellanea

Legal interest rate is reduced to 3% and late payment interest to 3.75%.

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Publicado el 11-2020 por PBS