The new fiscal year brings changes to Spain’s tax system.
Once the country’s 2021 budget is approved, 10 amendments for taxes will come into effect, which also include two changes approved back in October last year. For example, the so-called Tobina and Google taxes.
It should be noted that the tax reform is not as broad as the coalition agreement of the “ruling parties” envisioned. Thus, there will be no increase in the tax rate on private health care and education, introduction of a tax on large fortunes or equalization of the tax burden on gasoline and diesel fuel.
The government assures that the introduced tax changes will increase state revenue by 14.7%, reduce the budget deficit by 3.6% and compensate for the increase in social expenditures by 10.3%. Most of the levies will go to the overall economic recovery.
There are 10 2021 changes in taxation.
IRPF (personal income tax)
The personal income tax rate will increase by 2 percent for income from a principal activity exceeding €300,000 per year, from 45 percent to 47 percent, and by 3 percent for income from invested capital exceeding €200,000 per year, to 26 percent. According to the finance minister, this increase will affect 0.17% of taxpayers (about 32,000 people in total).
Corporate tax
Corporate rates will also change in 2021 to try to improve the continued reduction in the collection of this tax, although less than expected. The minimum tax rate for large companies, especially banks and oil companies, will not rise from 15% to 18% (as anticipated at the Budget 2021 stage). 95% of capital gains and dividends, rather than 100%, will be taxed. In addition, small and medium-sized companies (turnover up to 40 million euros per year), can request a deferral of payment of this levy to address other tax gaps.
Wealth tax
The proposal to replace inheritance tax with a tax on large fortunes did not find support in the government. But it was nevertheless approved to increase the rate paid by taxpayers on the highest tranche of assets (exceeding €10 million) by one percent, from 2.5% to 3.5%.
The application of this tax measure is in the hands of the Autonomous Communities, and some of them subsidize the payment of this levy in whole or in part.
IVA (Value Added Tax, VAT)
One of the taxes that undergoes the least changes. The only change to this indirect tax is a new rate that applies to sweet drinks when sold in supermarkets and stores, but not when sold in hotels.
Sweetened soft drinks will no longer be subject to a reduced rate of 10%, like the one applied to most food products, except for staple foods such as fruit, vegetables, bread or milk, which are taxed at 4%. From January, a general VAT rate of 21% will be imposed on sugary drinks, a measure through which the government plans to promote healthy habits and raise around 400 million euros for the budget.
Registration fee
Although there will be no increase in diesel tax, the automotive sector will face another tax increase: the European standard of CO2 emission levels per kilometer driven.
The registration tax increase means that cars that emit between 144 and 192 grams of CO2 per kilometer of travel will pay 4.75% of the vehicle’s factory price. Up to 144 grams are still exempt.
For emissions between 192 and 240 grams of CO2 per kilometer, you have to pay 9.75% of the factory price of the car, and 14.5% tax if they exceed 240 grams.
Automobile sector associations have criticized such innovations, this increase will make car prices more expensive by at least 5% with sales forecast to be 35% less than the previous year.
Insurance premium tax
An increase in the insurance premium tax rate from 6% to 8%, which will affect car, home and liability insurance policies. The government expects an increase of 510 million euros in tax collections on this item.
The finance minister noted that this is the first increase in insurance premium rates since 1998, and that the rate applied in Spain itself is lower than the European Union average.
Tax on single-use plastics
One of the fiscal novelties of the budget project is an environmental measure that aims to prevent the use of single-use plastic containers by imposing a tax rate of 0.45 euro cents for each kilogram of this type of plastic. A measure that the government expects to generate more than 700 million euros a year.
However, the measure is part of the draft Waste and Contaminated Soil Law, so its entry into force will not be automatic from the beginning of 2021, but from July. The Spanish plastics association rejected the measure and asked that it not be applied for another 12 years, despite recognizing that Italy and the UK have applied similar measures.
Pension plan
The measure itself is not a new tax, but it does mean the end of a tax advantage that has a direct impact on the calculation of personal income tax for taxpayers with a private pension plan. Thus, as of January, the maximum contribution to individual pension plans with the right to a personal income tax deduction is limited to €2,000, compared to €8,000 previously.
In this way, the government seeks to favor corporate pension contributions, for which it has increased the tax deduction limit in company plans from €8,000 to €10,000.
Tobina tax
The financial transaction tax (or Tobina tax) comes into force in January and the government plans to raise €850 million through a 0.2% levy on the purchase of shares issued in Spain.
The shares to which this rate applies must correspond to listed companies with a market capitalization of more than €1 billion, so only about 50 companies will be affected.
Google Tax
The Google tax was approved in January 2019, but was not applied after the rejection of that year’s budget draft and was renewed this year with parliamentary approval. This tax on certain digital services sets a rate of 3% on revenue from advertising or online intermediary services and on the sale of data created from information provided by the user and obtained by companies on the world wide web.