
A tax reform plan that includes lower income tax rates and changes to the taxation of savings and capital gains, as well as the so-called “impatriate” tax regime, has been submitted to Spain’s parliament for review and debate. Additional tax proposals would bring changes to the withholdings for directors and members of the liberal professions, the Nonresident Income Tax Law, and the exemption limit for pension contributions.
The Spanish government has put forward a tax reform plan that includes lower income tax rates and changes to the taxation of savings and capital gains, as well as the so-called “impatriate” tax regime. On 23 June 2014, the government released draft legislation that, if passed, would constitute a far-reaching reform of Spain’s tax system within the framework of economic reforms developed by the government and recommended by the European Commission and the International Monetary Fund. In early August, draft legislation was submitted to parliament for review and debate.1
If enacted, these reforms would mean important changes for the taxation of earned income and the taxation of savings/investment income. While Spain’s tax rules – in some cases – would be simplified, the reform package offers a mixed bag for individuals, and, on the whole, tax burdens will likely rise. (Each individual’s tax status should be determined in light of his or her particular situation.) This means that companies with international assignees subject to Spanish tax law may see their international assignment-related costs rise.
Below we summarize some of the key proposals.
New tax scales are proposed for savings income – there will be three brackets and reduced progressivity. The savings component of net taxable income will therefore be taxed according to the following scale:
Up to EUR |
2015 rate |
2016 rate |
Up to 6,000 |
20% (currently 21%) |
19% |
6,000 to 50,000 |
22% (currently 25%*) |
21% |
50,000 or more |
24% (currently 27%** ) |
23% |
* The 25% rate is currently applied from EUR 6,000 up to a tax base of EUR 24,000.
** The 27% rate is currently applied from a tax base of EUR 24,000.
This applies to such things as bank interest, dividends, interest arising on life insurance policies, etc.
Nonresident individuals and corporate entities are subject to NRIT to the extent their income is obtained in Spain. The proposed amendments to Nonresident Income Tax are designed to bring the current regulations for this tax into line with the EU rules, to adapt the NRIT to the proposed changes to Spain’s Personal Income Tax, and to bring greater clarity.
A number of amendments to the Nonresident Income Tax Law are set to take effect as of 1 January 2015, namely:
In order to encourage the free circulation of citizens throughout the EU, nonresident taxpayers are exempt from tax on capital gains obtained on the transfer of what was their main residence in Spain, provided that the amount obtained on the transfer is reinvested towards the acquisition of a new main residence.
New withholding percentages will be established for work income as follows:
The giving over or assignation of one’s main residence as payment of a mortgage debt, or as payment in judicial or notarial foreclosure proceedings will result in the exemption of the capital gain from taxation, subject to the non-existence of other assets.
The 60-percent and 100-percent deductions allowed against net rental income will be reduced to a single allowable 60-percent deduction.
Please note that this article does not discuss other proposed changes provided for in the draft law, such as those relating to the Corporate Income Tax – although, it is important to note the government aims to lower corporation tax rates from 30 percent to 28 percent in 2015 and to 25 percent in 2016.
The draft law will be debated in parliament and will be subject to comment by Spain’s economic and social partners.2
KPMG Abogados in Spain will endeavor to keep readers informed as developments occur.
1 Proyecto de Ley por la que se modifican la Ley 35/2006, de 28 de noviembre, del Impuesto sobre la Renta de las Personas Físicas, el texto refundido de la Ley del Impuesto sobre la Renta de No Residentes, aprobado por el Real Decreto Legislativo 5/2004, de 5 de marzo, y otras normas tributarias. (121/000109).
Or go to: Congress de los Diputados
2 See a news release on a recent consultation posted (in Spanish) on the website for the Ministerio de Haciendasy de Administraciones Públicas.
The information contained in this newsletter was submitted by the KPMG International member firm in Spain.
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