December 2019 – This information is out of date. Please contact us for information.
Tax Reform
The Tax Reform originally proposed by the Spanish government in June 2014 was published in the official gazette on 28th November 2014. The reform includes the introduction of the corporate income tax law. As well as changes to personal income tax, non-resident income tax and VAT (IVA). Changes to general tax are still pending approval.
Although the government presents it as positive with general reductions. There are also some increases which are important to know.
Tax Rates
Income Tax and Corporation Income tax rates are being reduced (even though they will still be above average in Europe).
Individuals who are residents of Spain are taxed on their salaries and pensions. As well as rents with progressive tax brackets at the moment from 24.75% to 52%.
In 2015, there will be only 5 brackets with rates reduced from 20% to 47%.
In 2016, the rates will be 19% to 45%. However, the maximum rate will be applied above 60,000€.
Savings
Savings income is taxed at the moment from 21% to 27% (21% up to 6,000€, 25% from 6,000€ to 24,000€ and 27% above 24,000€.
In 2015, the tax on the Bracket above 6,000€ will be 22% up to 50,000 and 24% above this.
2016, they will be reduced to 19% up to 6,000€, then 21% up to 50,000€ then 23%.
Non Residents
Non Residents pay income tax at a general rate of 24.75% on income obtained. And also based on property which is for their personal use as well.
From 2015 this will be cut to 24%. But for individuals resident in other European states which exchange information with Spain it will be 20% in 2015 and 19% in 2016.
The rate for interest, dividends, which non residents currently pay 21% will be reduced to 20% in 2015 and 19% in 2016. Corporate Income taxes are currently 30% and will be reduced to 28% in 2015 and 25% in 2016.
Tax Return threshold
The threshold below which a tax return does not need to be filed is increased from 11,200€ to 12,000€
Self employed people
“Autonomos” or the self-employed with annual incomes up to 12,000€ have already benefited since July 2014 from a lower retention. This is 15% from 21% and for all self-employed it will be reduced to 20% in 2015, and 19% in 2016.
Where energy efficient vehicles are part of compensation or used by automonos, the tax is reduced by up to 30%.
Regarding pension plans, the current tax relief on contributions up to 10,000€ or 12,500€ for tax payers aged 50 is reduced to 8,000€.
Capital Gains Tax
The government had been proposing a very unpopular reform of eliminating two important tax benefits. These were to do with capital gains tax and coefficient. Which increase the purchase value of the properties by applying adjustment coefficients so as to take account of inflation.
But in the face of a great deal of opposition, the government backed down partially. Now sales of property or other assets under 400,000€ will be exempted from the new regulations.
These exemptions will be applied to properties sold which were acquired prior to 31 December 1994. But the 400,000€ threshold applies to all assets sold cumulatively in a tax year. However, the new rules deny the existence of inflation by eliminating taper relief on property sales. The legality of both of these reforms has been questioned.
Residents renting out their property in Spain
Residents who are individuals and rent out their property currently pay 40% on the profit obtained. And nothing if the tenant is under 30 and meets certain requirements.
But in 2015 rental income will be taxed on 50% of the profit and it does not matter the age of the tenant.
The tax credit of 10.05% that is applied to the main residence being rented out for incomes lower than 24,107€ is being abolished.
Tax allowances for the purchase of the main residence will disappear.
Selling and leaving Spain
Currently if a person sells his main home in Spain and is still a resident. He does not have to pay Capital Gains Tax if within 2 years he reinvests in a new main home in Spain or abroad.
From 2015 to promote the free movement of the individuals within the EU, a seller will also have the same tax benefit. If he first ceases to be a resident and then sells his main home in Spain afterwards (thus also extended to non residents).
Properties handed back to the Bank
Something very unfair was borrowers who had lost their homes after defaulting on mortgage payments, being required to pay capital gains tax. This was on the difference between what they paid and the cancelled debt amount when this was higher than the amount originally paid. This is to be stopped, at last.
Please contact us with any tax related matters or to arrange an appointment with our accountant.