On 31 December last, the General State Budget Law for 2021 (LPGE ) was published, which approves various tax regulations, most of which are aimed at increasing taxation.
The new legislation contained in Law 11/2021, of 30 December (LPGE), has led to the modification of certain tax regulations that we have already advanced in our circular of last November, of which we will now provide a brief summary:
Corporate Income Tax
Limitation in the deduction for dividends and capital gains: The main novelty for 2021 consists of the introduction in the law of the concept of management expenses of investees, which is quantified at 5%, affecting dividends and capital gains of investees and also in deductions.
Thus, the exemption for capital gains and dividends generated by subsidiaries is reduced from 100% to 95%, with the remaining 5% being considered management expenses. However, an exception to the above limitation is provided for when the following requirements are met at the same time:
- Dividends or shares in profits are received by an entity whose net turnover in the immediately preceding tax period is less than 40,000,000 euros, which is not an asset-holding company, which does not form part of a commercial group before 2021 and which, in addition, does not have a shareholding in another entity before that year equal to or greater than 5%
- The dividends or shares in profits come from an entity incorporated after 1 January 2021 in which it holds, directly and since its incorporation, all the capital or equity.
- Dividends or shares in profits are received in the tax periods ending in the 3 years immediately following the year of incorporation of the entity distributing them, equal to or greater than 5% of the capital or equity of another entity.
In line with the above, under the tax consolidation regime, the amounts to be included in the individual tax bases in respect of dividends or shares in profits of entities and the amount of positive income obtained on the transfer of the shareholding in an entity to which the exemption applies will not be subject to elimination.
As regards the non-deductibility of negative income derived from the transfer of a holding in an entity, this will only apply when the percentage holding in the capital or equity of the entity is at least 5%, but not if the acquisition price of the holding exceeds €20,000,000 and the aforementioned percentage is not reached.
Parallel limitations are also regulated in the International Fiscal Transparency regime.
Deduction for the elimination of international double taxation on dividends or profit shares: The right to deduct dividends or shares in profits paid by a non-resident entity in Spanish territory is limited to when the shareholding in the capital of the non-resident entity is at least 5%. Thus, the deduction will not apply when the acquisition value of the shareholding exceeds €20,000,000 if the shareholding is less than 5%. In this regard, a transitional regime is regulated for a period of 5 years for acquisitions made before 2021.
The amount of this deduction, together with that of the deduction for the avoidance of double legal taxation, may not exceed the gross tax payable in Spain on this income if it had been obtained in Spanish territory. For the purpose of calculating the tax liability, dividends or shares in profits will be reduced by 5% for management expenses relating to such shares.
Limitation on the deductibility of financial expenses: The addition to the operating profit of financial income from holdings in equity instruments corresponding to dividends is eliminated when the acquisition value of the holding exceeds 20 million euros.
Deduction for investments in film productions and audiovisual series: The certificates will be binding -for accrediting and applying the tax incentives and identifying the beneficiary producer- for the competent tax authorities, regardless of when they are issued.
Value Added Tax
Increase in rates: VAT taxation on sweetened and sweetened beverages is increased from 10% to 21% in order to implement healthier habits.
Special rule of localisation in the territory of application of VAT: The rule of closure of the effective use applies to certain services when the recipients are not established in the European Union but their effective use or exploitation is carried out in this territory. From 2021, services located in the Canary Islands, Ceuta and Melilla are excluded from this rule, regardless of where their effective use takes place.
Simplified regime and the special regime for agriculture, livestock farming and fishing: The limits are extended to 250,000 euros instead of 150,000 euros, as is the case with the objective estimation regime for Personal Income Tax.
Personal Income Tax (IRPF)
Taxation of the general base: Income over 300,000 euros is now taxed at the marginal rate of 47% (previously 45%). Consequently, depending on the rates approved by each autonomous community, the rate can be as high as 51.5% and, in the specific case of Catalonia, 50%.
Taxation of the savings base (interest, dividends, capital gains, etc.): The rate for income over 200,000 euros is increased from 23% to 26%. As a result, the scale applicable in 2021 is as follows:
Withholdings and payments on account applicable to earned income: With effect from 1 January 2021, the scale for determining the percentage of withholdings and payments on account on earned income derived from employment or statutory relationships and from pensions and passive assets will apply the following scale:
In relation to previous years, a new bracket is included for taxpayers with earned income over 300,000 euros, at the rate of 47%, as a consequence of the rise in personal income tax rates mentioned above.
Limitation on the reduction for contributions to pension plans: The maximum individual contribution is now 2,000 euros per year (previously 8,000 euros). However, the joint limit between the contributions of the participant and the company is increased to 10,000 euros.
Contributions in favour of the spouse are limited to 1,000 euros per year (previously 2,500 euros). Remember that this contribution requires that the spouse does not obtain net income from work or economic activities, or obtains less than €8,000 per year.
The limit of €5,000 per year for group dependency insurance premiums paid by the company is maintained.
Objective assessment (Modules): The amounts that exclude the application of this regime are extended and are set at 250,000 (all activities) and 125,000 euros (amount of invoices issued). For agricultural, livestock and forestry activities it is set at €250,000.
Impatriate regime: The rates applicable since 1 January to workers posted to Spanish territory have also been increased:
The following scale will be applied to determine the total tax liability, except in the case of savings income:
The new feature is that the rate applicable to taxable income above €600,000 is increased to 47% (previously 45%).
For the determination of the gross tax liability corresponding to savings income (dividends and other income derived from the participation in the equity of an entity, interest and other income obtained from the transfer of equity to third parties and capital gains derived from the transfer of assets), the following scale will be applied:
o The percentage of withholding or payment on account on earned income is also increased to 47% (previously 45%) for remuneration exceeding 600,000 euros.
The LPGE increases from 2.50% to 3.50% the tax rate for the highest fortunes (from 10,695,996.06 euros).
As this is a tax ceded to the Autonomous Communities, it will be up to the latter to establish the rate applicable in each case. Thus, in the case of Catalonia, it remains at 2.75% for taxable income exceeding 10,695,996.06 euros).
In addition, it is established that the Wealth Tax will be indefinite in nature without the need for its annual extension, as was the case until now.
In 2021, two new exemptions are added, applicable to:
- Electricity consumed on vessels and generated on board them.
- The electricity supplied that is subject to compensation with surplus hourly energy, in the form of self-consumption with surpluses subject to compensation, in accordance with the provisions of Royal Decree 244/2019, of 5 April, which regulates the administrative, technical and economic conditions of self-consumption of electricity.
The taxable base will be the result of applying, where applicable, on the taxable base a 100% reduction that will be applicable, provided that the requirements and conditions established by regulations are met, on the amount of electricity supplied or consumed in rail transport.
Tax rate: the minimum amount of €0.5 per megawatt-hour (MWh) will also apply to rail transport.
Taxation of insurance premiums
The levy is increased from 6% to 8%.
For the year 2021, the legal interest rate is maintained at 3% and the interest rate for late payment at 3.75%.
The public indicator of multiple effects income increases by 5% with an annual amount of 6,778.80 euros. In those cases in which the reference to the minimum annual interprofessional wage has been replaced by the IPREM, the amount is set at 7,908.60 euros per year, or 6,778.80 euros if special payments are excluded.
Due to the requirements of some of the measures analysed, it is advisable to review their effect on a case-by-case basis for those cases that require a detailed analysis.
Finally, it should be noted that some Autonomous Communities have also approved tax measures applicable for 2021, so if you need information on any specific territory, we will provide it on a personalised basis.