Tax novelties in the General State Budget Law for 2023

On 24 December last, Law 31/2022 on the General State Budget for 2023 (LPGE) was published in the Official State Gazette (BOE).

The LPGE has been approved with changes in tax matters, with effect from 1 January 2023, which we advanced in part in our AddNEWS last October. For a better follow-up, here is a summary of the main changes approved:

Personal Income Tax

Employment Income

• The amount of the reduction for obtaining earned income is increased for taxpayers with a gross annual salary of up to 21,000 euros and the deduction brackets are updated.
• The gross annual salary from which income tax is payable is increased to 15,000 euros per year (previously 14,000 euros).

In addition, the lower threshold for the obligation to declare income from work has been increased to 15,000 euros per year.

In relation to the self-employed

• The reduction applicable to economically dependent self-employed workers is increased by the same amounts.
• For the 2023 tax period, the percentage of deductible expenses for provisions and expenses that are difficult to justify is increased from 5% to 7% for self-employed workers who determine their net income in accordance with the simplified direct assessment method.
• The reduction applicable to the net module income obtained in the 2023 tax period for those who determine the net income from their economic activity using the objective assessment method is increased to 10%.

Savings income

The tax rate is increased from 26% to 27% for income over 200,000 euros that is included in the savings base. It is also increased to 28% for income over 300,000 euros.

Contributions and contributions to social welfare systems

The maximum contribution limit is increased from 1,500 euros to 8,500 euros, provided that the increase comes from company contributions or contributions by the worker to the same pension plan, subject to certain requirements.

Deduction for maternity

The scope of the 100 euro maternity tax credit is extended to women with children aged 0 to 3 who receive contributory or welfare benefits, and not only for working mothers.

Deduction for childcare expenses

The limit will be the total non-subsidised expenditure instead of the social contributions paid.

Deduction for habitual residence in La Palma in 2022 and 2023

A deduction is established for the tax periods 2022 and 2023 for those taxpayers who have their habitual and effective residence in La Palma. This deduction is the same as the one foreseen for residents in Ceuta or Melilla.

Withholding rate for certain activities

It establishes a withholding and payment on account rate of 15% for income from work derived from the production of literary, artistic or scientific works and income from intellectual property, whatever its classification. The withholding rate will be 7% when:

• The royalties are generated by a taxpayer whose income for such concept had been less than 15,000 euros in the previous year and represents more than 75% of the sum of income from economic activities and income from work, provided that the payer is notified.
• These are advances on account derived from the assignment of the exploitation of copyright that are to be accrued over several years.

Corporate income tax

Tax rate

The tax rate applicable to entities with a net turnover of less than one million euros in the previous tax period and which are not considered as asset-holding entities is reduced from 25% to 23%.

Accelerated depreciation of vehicles

Investments in electric vehicles (FCV, FCHV; BEV; REEV and PHEV types) used for economic activities and which come into operation in 2023, 2024 and 2025 may apply double the coefficient of the maximum depreciation coefficient of the depreciation tables, i.e. 50%.

Value Added Tax

In relation to VAT, the LPGE regulates many adaptations of a technical and harmonisation nature, so we will mention the most common ones:

Place of supply of services

The special rule of effective use in the supply of services between entrepreneurs is no longer applicable in the sectors and activities that generate the right to deduct, so that the general rule of taxation at destination will apply. However, it remains in force in sectors that do not generate such a right (financial sector, insurance) and its application is extended to the provision of intangible services to final consumers not established in the European Union, when it is established that their consumption or effective exploitation is carried out in the territory where the tax is levied. In addition, this rule shall apply to the leasing of means of transport

Bad debts

The following amendments are made in relation to bad debts:

• The period is extended from 3 to 6 months for issuing the corrective invoice, subsequent to the end of the period of one year or six months from the accrual of the transaction.
• The means that can be used to claim payment from the debtor are made more flexible.
• The minimum amount of the taxable base is reduced from 300 to 50 euros for the transaction that can be modified when the debtor is considered to be a final consumer.

Bankruptcy credits

Allows VAT to be recovered in the case of uncollectible debts as a result of insolvency proceedings declared by a court in another Member State.

Reverse charge

In general, the special reverse charge mechanism applies to transactions carried out by persons or entities not established in the territory of application of the tax. However, in order to guarantee the right to deduct, these exceptions to this rule are included among the exceptions:

• The provision of property leasing services subject to and not exempt from tax, which are carried out by persons or entities not established in the territory where the tax is levied.
• The provision of intermediation services in the leasing of real estate carried out by non-established entrepreneurs or professionals.

Reduced tax rate of 4%

It provides for its application to tampons, sanitary towels and panty liners, as they are products of basic necessity, as well as condoms and other non-medicinal contraceptives.

Tax on Economic Activities

The tax rates incorporate new groups:

• Section one: group 848 to classify services provided by flexible offices, “coworking” and business centres.
• Second section:
  • Writers and scriptwriters: group 864.
  • Other professionals related to artistic and cultural activities other than those classified in the third section: group 869.
  • Mountain guides: group 889.
• Third section: group 034, which specifically includes composers, lyricists, arrangers and musical adapters.

In addition, the quotas of group 761 of the first section referring to “Telephone services” are modified after the Supreme Court considered in its ruling of 14 July 2022 that the higher taxation of this group was not justified.

Tax on the Increase in the Value of Urban Land

The amounts of the maximum coefficients foreseen to be applied to the value of the land are updated according to the period of generation of the increase in value, for the determination of the taxable base of the tax.

Legal interest and late payment interest

The legal interest rate is also increased to 3.25% (previously 3%) and late payment interest to 4.0625% (previously 3.75%).

Public Indicator of Multiple Effect Income (IPREM)

For 2023 it is set at 600 euros per month, 7,200 euros per year for 12 payments or 8,400 euros per year for 14 payments.

In addition, the regulation includes modifications applicable in the Canary Islands in relation to the IGIC and also to the Canary Islands Special Zone Tax Regime (ZEC) and introduces the Special Tax Regime of the Balearic Islands applicable for tax periods starting from 1 January 2023 and 31 December 2028.

Finally, as every year, the priority patronage activities and programmes and the tax benefits applicable to events of exceptional public interest are included.

These measures are complemented by those approved in other temporary regulations referred to in our AddFLASH.