Taxation changes in Spain for year 2015

In this entry we review the tax innovations and changes for year 2015 in relation to Income Tax, Corporation Tax, Wealth Tax and Inheritance and Gift Tax and how these changes affect both residents and non-residents.

PERSONAL INCOME TAX

OBLIGATION TO PRESENT THE TAX RETURN

There is no obligation if the gross salary income does not exceed 22,000 € per year.

The limit is changed in 2015 in the declaration requirements for taxpayers who receive work income that comes from two or more payers, spousal maintenance or alimony, income received from employer not obliged to make retentions or under fixed rate of retention, passing from 11,200 € per year to 12,000 €.

TAX BANDS FOR THE PERSONAL INCOME TAX

Tax bands paid by taxpayers based on their income have been modified, moving from the existing seven to five. There is a decrease in the rates for all income brackets.

The first 5,550 € received by each contributor are tax free (previously 5,151 €).

Exempted minimums that apply to employees are amended. All employees will benefit from a reduction of 2,000 € which will rise to 5,700 € in the case of yearly salaries below 11,450 €.

MINIMUM EXEMPTED FOR FAMILY MEMBERS

The minimum exempted by each offspring rises. The first child generates an exemption of 2,400 €. The second one, 2,700 €, and the third and fourth ones, 4,500 €. All these amounts are deductible until the descendants are 25 years old.

Furthermore, the Government has expanded the minimum exempted for dependent elderly over 65 y/o and 75 y/o to 1,150 € and 2,550 €, respectively.

For disabled people, either the taxpayer or one of his/her children or dependent ascendant, if the degree of disability ranges from 33% to 65%, the minimum exempted is 3,000 €. If the degree of disability is greater than 65%, it rises to € 6,000.

It is also increased the figure known as “negative tax”, ie, taxpayers may request advances of tax deductions that are received monthly from public funds.

CAPITAL INCOME

The minimum rate for income up to 6,000 € goes down from the previous 21% to 20% in 2015 and to 19% in 2016. For income between 6,000 € and 50,000 €, the rate is reduced from 25% to 22% in 2015 and to 21% in 2016. Finally, for tax payers with income above 50,000 €, the rate goes down from 27% to 24% in 2015 and to 23% in 2016.

From now on all dividends are taxed. Before, the first € 1,500 charged as dividends were exempt.

CONTRIBUTIONS TO PENSION PLANS

There is a reduction of the maximum amount that could be deducted from the taxable income as contribution to pension plans. It goes down from 10,000 € per year (12,500 € for people over 50 years) to 8,000 €.

REDUCTION OF THE ABATEMENT COEFFICIENTS AND DISAPPEARANCE OF THE INDEXATION IN THE SALE OF REAL ESTATE

As we already saw in our blog entry titled Indexation no longer applicable to the calculation of CGT, this measure elevates the tax bill on the income tax return for the year in which the house is sold.

RENTALS

For tenants: It disappears the deduction for leasing of the main residence that taxpayers with income below 24,107 € could apply for. It remains for existing contracts until they expire.

For landlords: The reduction for rental housing is increased to 60%.

SELF EMPLOYED

Tax withholding applied to the turnover of these workers is reduced. It goes from 21% to 19% in 2015 and to 18% in 2016.

For self employed workers with an annual invoicing of less than 15,000 € involving at least 75% of their income, the Government has reduced the retention to 15%.

Changes have also been made in the “module” system. The threshold to be taxed under this system is reduced from a maximum of 450,000 € of income and 300,000 € of expenses to 150,000 € for each concept. Furthermore, self employed workers that invoice more than 50% to companies (rather than individuals), or those whose activities are related to construction, cannot accommodate to this system.

NON-RESIDENTS

The general rate of taxation for non-residents is reduced from 24.75% to 24%. For those residing in a member state of the European Union the rate drops to 20% in 2015 and 19% in 2016.

The rate on the sale of real estate by non-resident owners is reduced from 21% to 20% in 2015 and to 19% in 2016. The purchaser remains liable to withhold and pay to the Spanish Inland Revenue 3% of the sale price on account of the potential capital gains tax of the non-resident vendor.

WEALTH TAX

It remains in force in 2015.

The wealth tax is fully transferred to the regional governments known as Comunidades Autónomas, which may legislate on the minimum exempted, the tax rate, deductions and credits. What has changed this year is the fact that non-residents might apply for some bonuses, deductions and rates provided by regional regulations, thus ending with the potential discriminatory situations as ruled by the EU.

CORPORATE TAX

For newly formed companies the reduced rate of 15% set by the Law for Entrepreneurs remains. This tax rate will apply to the first 300,000 € of tax base and will rise to 20% for any excess on that amount for the first two years, counting from the first year with positive tax base.

The overall rate drops from 30% to 28% in 2015 and finally to 25% (already applied to SMEs) in 2016.

The so called “capitalization reserve” is incorporated, allowing companies to avoid payment of tax on 10% of their profits provided that these amounts are spent on the reserves of the company.

INHERITANCE TAX AND GIFT TAX

For the purpose of complying with the sentence of 3rd September 2014 of the European Court of Justice and avoid discrimination against non-residents, the Spanish Government, in virtue of the third final provision of Law 26/2014 of 28 November, allows implementing equally to resident and non-resident the regional rules on successions and donations. We will discuss this issue in deep in a future entry of this blog.

Luis M. Vicente Burgos
VICENTE & OTAOLAURRUCHI ABOGADOS