Tax measures for 2021 in the pipeline
On 28 October last, the General State Budget Bill (PrLPGE) for 2021 was presented to the Spanish Parliament and is currently being processed
The Budget Bill for 2021 includes a series of measures which, according to the explanatory memorandum, seek a fairer and more progressive tax system, increasing the contribution of higher incomes and multinationals. These measures refer mainly to:
Personal Income Tax
The changes envisaged for personal income tax would be as follows:
- A two-point increase in the percentage of taxation of the general tax base for incomes over 300,000 euros, with the marginal rate rising to 47% (now 45%), which, depending on the autonomous community, could be as high as 50%.
- Increase in the tax rate applicable to the net savings tax base (interest, dividends, capital gains, etc.) for income over 200,000 euros, from 23% to 26%. For income below this amount, taxation remains unchanged.
- Limitation of the reduction for contributions to pension plans from 8,000 euros to 2,000 euros per year. However, the joint limit between the participant’s and the company’s contributions is increased to 10,000 euros.
- With regard to the modules, the current limits are extended.
Corporate Income Tax
The new budgets aim to reduce the exemption for capital gains and dividends generated by subsidiaries from 100% to 95%. However, those companies with a turnover of less than 40 million could continue to apply the total exemption for dividends for the next 3 years. The deduction for the elimination of international double taxation is also limited for dividends or shares in profits and income derived from the transfer of shares in the capital or equity of companies whose acquisition value exceeds 20 million euros, requiring a significant shareholding of 5% and regulating a transitional regime for a period of 5 years. Finally, the regulation of the limitation on the deductibility of financial expenses is modified by eliminating the addition to operating profit of financial income from holdings in equity instruments that correspond to dividends when the acquisition value of these is greater than 20 million euros.
The budget proposes to increase the tax on the highest wealth from 2.50% to 3.50%. However, as this tax is devolved to the Autonomous Communities, it will be up to them to set the applicable rate in each case. In addition, it is envisaged that the Wealth Tax will be indefinite in nature without the need for its annual extension by law, as has been the case until now.
Value Added Tax
The Bill increases VAT from 10% to 21% on sugary and sweetened beverages in order to implement healthier habits. However, it seems that this increase will only be passed on to supermarket sales and not to consumption in bars and restaurants, so as not to further damage this sector. The special rule of localisation in the territory of application of VAT to certain supplies of services to non-Community nationals, which are effectively used or operated in the territory of application of Spanish VAT, is also modified. In this regard, the Canary Islands, Ceuta and Melilla are once again excluded from its application, a wording that was used before 2014 and which was modified, to now return to the initial wording. Finally, as with Personal Income Tax, the application of the limits for the simplified regime and the special regime for agriculture, livestock and fisheries is also extended, from 150,000 to 250,000 euros.
Taxes on Hydrocarbons
The PrLPGE aims to increase the state rates for diesel to bring the taxation of diesel closer to that of petrol.
Taxation of Insurance Premiums
The tax is increased from 6% to 8%.
For the year 2021, the LPGE maintains the legal interest rate of money at 3% and the late payment interest rate 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.
Entry into force
The law will come into force the day after its publication in the BOE (Official State Gazette), without prejudice to the different temporary measures provided for in some specific sections.
Other tax measures not included in the Draft LPGE
In addition, measures included in the Draft Law on the Prevention and Fight against Fraud are being negotiated, in which, among others, the following are intended:
- Establish the reference value of real estate to be set by land registry for the purposes of taxation of Transfer Tax, Wealth Tax and Inheritance and Gift Tax.
- Modify the limitation of cash payments to 1,000 euros in certain cases,
- Control cryptocurrencies by means of new declarations and their inclusion in Form 720 when they are located abroad.
- Increase control over SICAVs and modify the SOCIMI regime, subjecting undistributed profits to a tax of 15%.
- Ban tax amnesties.
- Create a new international tax transparency regime
- Modify the exit tax.
- Ban dual-use software, which allows double accounting.
In view of the more than likely modification of the above rules and the increase in taxation for next year, it is necessary to analyse whether it is necessary to take measures before the end of 2020 in order to minimise their impact.