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2013 INCOME TAX CAMPAIGN AND RECENT ANNOUNCED CUTS IN SPANISH TAXATION

The Income Tax Campaign for 2013 has just started last 1st of April, with only few days left to submit your returns.

This year 2014, we will be able to submit our returns from 23rd of April with deadline 30th June.

Spain’s Experts Committee on Tax Reform, formed by 8 registered accountants (Economists) and one lawyer, announced last 13th March on their 400 pages report, substantial cuts to direct taxes and social contributions, which would be funded through a reduction in tax expenditures, and environmental and indirect tax hikes.

The prime minister Rajoy recently restated the Government’s aim of making an income tax (IRPF) simpler and fairer through a reform of taxation. He said the Government would increase tax incentives for long-term savings and investments, and introduce other tax measures aimed at protecting the environment.

This program of income tax reductions will be not all implemented over a single year, and the country’s low-income earners will benefit most from the tax relief.

According to proposals made to the government, Spain must cut individual and corporate tax rates and increase indirect levies on consumer items such as value-added tax (VAT), and taxes on tobacco and alcohol. The tax rate on diesel fuel will increase brought into the line of EU environmental regulations.

A much harder anti-fraud policy has been also advised, as there is a massive black economy.

Income Tax

  • There is a currently minimum rate of 24,75 percent, for incomes between 0 and 17,707.20, which should be bring down to 20 percent, and the current maximum rate of 52 for highest incomes should be put down into 50 percent.
  • The committee also advised to increase personal allowances, and to reduce the current existing number of personal income tax brackets from seven to a maximum of four, in line with European and worldwide tax norms.
  • Current income tax brackets for savings of 21, 25 and 27 percent, affecting to capital gains and incomes on bank savings and other investments, should be eliminated, and put into a standard 20 percent rate.

Property Taxes (Transfer Tax, Stamp Duty Tax, Wealth Tax an Council Tax)

  • The government has been advised to eliminate the stamp duty tax, as well as the transfer Tax affecting resale purchases of 8 percent rate for Murcia Region.
  • The recent reintroduced wealth tax, which was abolished in 2008, will definitely put into bed.
  • But where there’s a cut in one tax, there must an increase in another to collect the same, and a new Council Tax (IBI) will born with higher taxation brought into line with similar local rates applying in the Eurozone.

IVA (value-added tax)

Further, the committee called for some products and services subject to the 10 percent reduced rate of value-added tax (VAT) to be raised towards the standard rate, with the exception of VAT for housing, the tourist sector, and public transport services.

Corporate Tax

  • The proposal calls for cuts on corporate tax from 30 percent to around 20 percent, and a reduction in corporate tax shelters, which have permitted most large companies to pay an effective rate of less than 5 percent, to bring effective corporate tax rates closer in line with statutory rates.
  • The report suggests a cut in social contributions to reduce the cost of labor for employers, with the aim of fostering job creation.
corralalcaraz2013 INCOME TAX CAMPAIGN AND RECENT ANNOUNCED CUTS IN SPANISH TAXATION