The Spanish Government has confirmed the forthcoming tax changes, which are based on a general reduction in personal income tax for low incomes and more taxes on large estates. These measures will be included in the General State Budget for 2023.
Tax changes in Spain 2022
As explained by Spain's Minister of Finance, María Jesús Montero, the new tax, which the Government has christened the 'solidarity tax', will tax net wealth in excess of 3 million euros, while capital income will be taxed more in personal income tax from 200,000 euros. On the other hand, the limit for exemption from personal income tax has been extended and a tax cut for SMEs has been approved.
We review Spain's tax changes for 2022-2023, which, according to the government, will improve public revenue by some 3.14 billion euros over the next 2 years:
New tax for high net wealth
This new tax will be applied in 2023 and 2024 and will consist of three brackets: between 3 and 5 million euros of net wealth, 1.7%; between 5 and 10 million euros, 2.1%; and above 10 million euros, 3.5%. With this new tax, which will make it possible to deduct Wealth Tax, the Government expects to raise 1.5 billion euros and will affect some 23,000 taxpayers.
Capital income and capital gains will be penalised
At the same time, the Government will raise the taxation of capital income in personal income tax of over 200,000 euros by one point, to 27%, and for capital gains of over 300,000 euros, it will be raised to 28%, two points more.
Lower personal income tax for low incomes
Along with this increase for high incomes, the Spanish Government will also approve measures in personal income tax to favour middle and low incomes, raising the tax benefit currently applied to incomes of up to 18,000 euros to 21,000 euros. This measure will mean a saving of 1,881 million euros. Likewise, earned income from 15,000 euros (1,000 euros more than before) will be exempt from personal income tax.
According to the Treasury, a worker without descendants earning 18,000 euros will save 746 euros a year, and a pensioner over 65, with 16,500 euros a year, will save 689 euros.
New personal income tax changes for the self-employed
The government has also announced an additional 5% reduction in the net yield of the modules for the self-employed and has decided to increase the reduction for deductible expenses that are difficult to justify by two points, to 7%. Some 578,000 self-employed workers will benefit from the reduction in the modules and another 956,000 from the simplified direct estimation system, according to the tax authorities.
Lower corporation tax for SMEs
Finally, the new tax proposal that will be included in the public accounts for 2023 includes a two-point reduction in the corporate tax rate for SMEs with a turnover of up to one million euros. Their profits will be taxed at 23%, compared to the current 25%. And it is estimated that it will affect some 400,000 small companies.
In the case of large companies, the main measure is to limit by 50% the possibility of offsetting the losses of subsidiaries of consolidated groups. This will affect some 3,600 large companies in Spain.