SPAIN: SUMMARY OF NEW TAX MEASURES TO REDUCE PUBLIC DEFICIT
The Official Gazette (BOE) published on December 31, 2011 the Royal Decree-Law 20/2011 on urgent budget, tax and financial measures for the correction of the public deficit. Given the amplitude and variety of the measures taken, we will give you a brief summary of those of fiscal nature we consider most relevant as well as other fiscal measures approved in the last months of last year 2011 for its practical interest.
Personal Income Tax (IRPF)
The measures listed below are applicable for tax years 2012 and 2013, coming into force on January 1, 2012, except for those regarding the increase of the withholding taxes on employment income that apply as from February 1, 2012.
Increase of the state rate of the gross tax, which is set as follows (don't forget that the fees approved by the respective Autonomous Communities have to be added):
1. State tax table applicable to the general tax base
This rate increase applies therefore to the entire general tax base, including employment income, income from economic activities, real estate income and so on.
2. State tax table applicable to the savings tax base
This rate increase applies therefore to the entire savings tax base, including interest, dividends, etc...
In the case of Catalonia, for example, due to the above increases the joint tax table (national and regional) is as follows:
1.Tax table applicable to the general tax base
2. Tax table applicable to the savings tax base
Increase of the withholding tax rates applicable to earned income obtained from February 1, 2012, which are set as follows:
Increase of the withholding tax rates applicable to income derived from image rights assignment, investment income (including interest, dividends), gains from the redemption of shares and collective investment schemes, awards, leasing or subleasing of real estate, among others, rising from 19% to 21%.
Increase to 42% of the withholding tax rate applicable to work income earned by administrators and members of the boards.
Elimination of the limit of EUR 24.107,20 of the tax base in order to qualify for the application of the deduction for the purchase of a principal residence, retroactively from 1 January 2011, increasing the maximum deduction base to Euro 9.040 (being of EUR 12,080 for works and installations for housing adaptation).
Extension of some tax incentives for 2012, among others, the reduction of 20% of the net income for job maintenance or creation.
Corporate Income Tax (IS)
Also on an interim basis, from January 1, 2012 to December 31, 2013, increase of the general withholding tax rate from so far 19% to 21% applicable to income derived from the lease of property, interest and dividends, among others.
Extension to tax periods initiated in 2012 of the reduced tax rate of 20% - 25% applicable to companies with a turnover of less than EUR 5 million and an average staff of 25 employees, provided they maintain or create jobs.
Also the extension of the deduction for expenses and investments to promote the use of new technologies by employees.
Regarding instalment payments of the corporate income tax, there is no significant change. It was just necessary to include the regulation of the same in the mentioned Royal Decree, since Article 45 of the Revised Text of the Corporate Income Tax Law, as for the rates, refers to the Budget Act of each year. Since for now there is no Budget Act for 2012, it is necessary to supplement this lack, so just remember that for tax periods initiated in 2012 the applicable tax rate is as follows:
a) 18% for the method of calculation provided for in article 45.2 of the Corporate Income Tax Law (gross tax of the last tax period).
b) 21% for the method of calculation provided for in article 45.3 of the Corporate Income Tax Law (tax base of the current tax period), except for those companies whose turnover is less than 20 million Euros, in which case 24% or 27% are applied depending on whether the turnover is below 60 million Euros or above.
Remember also that on August 20 of last year, Royal Decree-Law 9/2011 entered into force, by virtue of which the limitation to offset tax losses, effective for periods beginning exclusively in 2011, 2012 and 2013 was approved; thus a limit to the compensation of loss carry forwards from previous years is introduced for those companies whose net turnover in the previous 12 months has exceeded 20 million Euros. So during the above financial years we can find the following situations:
The above change has been accompanied by an increase of three years of the period of compensation, and with effect for periods beginning on or after January 1, 2012 and for all types of companies (i.e., regardless of their business volume) and extending from 15 to 18 years the deadline for the compensation of tax losses. This extension will affect all those negative tax bases to be offset in the first tax period starting as from January 1, 2012.
Non-Residents Income Tax (IRNR)
The measures listed below are applicable for tax years 2012 and 2013, coming into force on January 1, 2012.
The general tax rate applicable to non-residents rises from 24% to 24.75%.
Increase from 19% to 21% of the tax rate applicable to dividends, interest and capital gains as well as income received by permanent establishments of non-residents transferred abroad.
Extension until December 31, 2012 of the super-reduced rate of 4% applicable to the delivery of housing.
The general obligation for all taxpayers to file an information return (form 340) with the information contained in the VAT registry been postponed for the year 2014. This information return is currently filed by taxpayers who have opted for the VAT monthly return (REDEME).
Wealth Tax (IP)
On September 18, 2011 Royal Decree-Law 13/2011 came into force so that the wealth tax has been reintroduced. This is a temporary measure that will only affect the tax periods 2011 and 2012 as the application of a 100% bonus on gross tax was provided with effect as from January 1, 2013; this technique was already used in 2008 when the deletion of the tax was approved.
Although the applicable regulations are contained in the current Wealth Tax Act 19/1991 of June 6, the Royal Decree-Law recently approved provides the following tax news:
Increase of the exemption for principal residence up to a maximum of 300.000 Euros (currently set at 150.253,03 Euros).
Increase of the minimum exemption to 700.000 Euros (so far set at 108.182,18 Euros). This minimum will apply as long as the Autonomous Region has not established a different one. New is that this minimum shall also apply to non-residents in Spain who are taxed by this tax and prior to this reform could not benefit from it.
Only those taxpayers either who have a tax liability or the property or rights of whom exceeds 2.000.000 Euros (previously 601.012,10 Euros) are required to file this tax return.
However, the usual residence of each taxpayer will have to be taken into account so as to determine the specific fiscal impact of the changes introduced by Royal Decree-Law 13/2011, because we are dealing with a tax transferred to the Autonomous Communities. They have legislative powers in the following aspects of the tax: minimum exemption, tax rates as well as tax deductions and credits.
Other relevant changes to taxation
The so-called "free days" have been expressly regulated, allowing taxpayers to designate a maximum of thirty days during each year in which the tax agency (AEAT) will not deliver notices to their email addresses.
As regards form 347, the annual tax return of transactions with third parties over 3.005,06 Euros, already for 2011, to be filed in March 2012, shall contain a quarterly breakdown of the information; for years 2012 onwards, the filing of form 347 will be advanced to the month of February.
On an interim basis, for the years 2012 and 2013, a complicated system has been provided to increase the rates of the Property Tax, for which the dates of the latest revisions of the real estate cadastre must be taken into account. The rates referred to by the increase, 10%, 6% and 4% respectively, turn on the tax rate currently in force in each municipality.
As for the General Tax Law, references to the provisions of Directive 2010/24/EU of 16 March on mutual assistance in the recovery of claims relating to certain taxes, duties and other measures are included (mutual aid actions, exchange of information between administrations, etc.)
Finally, with effect from January 1, 2012 the Excise Act has been amended in relation to the partial refund for diesel for professional use; this change involves the incorporation into Spanish law of Directive 2003/96/EC, of 27 October 2003 by restructuring the Community framework for taxation of energy and electricity products.
For further information please contact HLBI member firm HLB Bove Montero y Asociados:
Mr. José Mª Bové
HLB Bové Montero y Asociados
Mariano Cubí, 7
Phone: +34 93 218 07 08
Mobile: +34 607 276 926
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