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Abigail Blanco |
Gonzalo Rincón |
On December 30 2011, the Council of Ministers approved Royal Decree-Law 20/2011, aiming to tackle the budget imbalance and to put the economy on track for a lasting recovery from public debt and deficit problems (the RDL published on December 31 2011 and validated on January 11 2012).
The most commented change introduced by the RDL is the notorious increase in personal income tax rates.
As it is well known, rates applicable to the general taxable base (which includes, among others, salary income or income from immovable property) are calculated in Spain according to two progressive scales: the first one approved for the whole Spanish Territory, and the second one approved by each autonomous community; so that the gross tax payable by any individual is the result of applying both scales, the second one being the one approved by the autonomous community in which the taxpayer resides.
The RDL has now introduced, for 2012 and 2013, a supplementary tax (gravamen complementario) on the first scale (that applicable to the whole territory) which goes from 0.75% to 7%. By applying this supplementary tax, the general highest marginal rate has been brought up to 52% (although in some autonomous communities it may be higher or lower depending on their own scale).
Additionally, tax rates applicable on taxable savings income have been increased up to 21% (for income up to the first €6,000 ($7,600)), 25% (for income on the frame between €6,000 and €24,000) and 27% (for income, on the part exceeding €24,000).
In parallel to the abovementioned increase, the withholding rates have also been changed to bring them in line with the new tax rates. In this sense the new supplementary tax has been summed up to the withholding scale applicable to salary income (which again, shows a maximum marginal rate of 52%, in this case applicable to the whole Spanish territory, without prejudice to specific regimes applicable in foral territories of Navarra and the Basque Country). Additionally, the general 19% tax rate (applicable to savings income, for example) has been increased to 21%. Finally, the withholding tax rate applicable to directors' compensation has been raised from 35% to 42%. However, other rates have been kept unchanged, such as the 7%-15% rate applicable to income from professional activities.
Corporate income tax and non-resident income tax rates have not got away from this general increase in taxation
Indeed, the 19% withholding and tax rates of both taxes have been increased up to 21% and the general 24% rate of non-resident income tax has climbed to 24.75%. Along the same lines, the additional tax rate on transfers abroad of income obtained by permanent establishments of nonresidents has been raised from 19% to 21%.
Besides, the increase in tax rates for prepayments of corporate income tax approved in August 2011 for large companies with net revenues over €20 million, has been confirmed as applicable also for fiscal years initiated in 2012 and 2013. In consequence, the rates applicable will be 18% for entities that use the tax payable method and, for entities that use the taxable base method, 21% when net revenues are under €20 million, 24% when net revenues are over €20 million but under €60 million, and 27% in all other cases.
Finally, an increase has been approved for urban property tax rates (for fiscal years 2012 and 2013). Increases mainly vary depending on when the authorities last approved the values to be taken for each property.
On the other hand, the RDL regulates certain tax benefits, mainly extending to 2012 the applicability of benefits, which were thought to be in force only up to 2011. In this sense, the following measures may be highlighted:
The RDL has reinstated (effective from January 1 2011) the tax credit for investment in an individual's principal residence, removing the ceiling on taxable income to be entitled to the tax credit, which was introduced at the end of 2010 for fiscal years as from 2011.
Additionally, taxpayers subject to personal income tax whose combined net revenues from all their economic activities are under €5 million may apply in 2012 the 20% reduction in net income. This reduction will be applicable provided that those taxpayers have an average headcount of less than 25 employees and create or maintain employment at the same level (with respect to the average headcount for 2008).
Also, taxpayers subject to corporate income tax will be able to apply in fiscal year 2012 the super-reduced 20% tax rate to the first €300.000 of net income, in case that net revenues in 2012 are under €5 million and provided that the average headcount in the same period is lower than 25 employees (if employment is created or maintained at the same level with respect to the first tax period commenced following the start of 2009). The remaining portion of taxable income will be taxed at 25%.
Besides, taxpayers subject to corporate income tax may apply in fiscal year 2012 the tax credit for expenditure and investments on encouraging employees to use new technology outside the workplace and working hours (this expenditure not generating taxable salary income for employees).
Finally, the super-reduced 4% Spanish VAT rate on housing sales has been extended to operations made during 2012.
Abigail Blanco (abigail.blanco@garrigues.com) and Gonzalo Rincón (gonzalo.rincon.de.pablo@garrigues.com)
Garrigues
Garrigues is the Spanish member firm of Taxand
Tel: +34 93 253 37 00
Website: www.garrigues.com
