7 August, 2018

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.


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