With the publication of the Spanish General State Budget for 2022, together with Law 38/2022 and Royal Decree-Law 20/2022 of 27 December 2022, a series of significant tax reforms have been approved, entering into force in 2023.
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Written by Alessandro Scherini
Tax and Accounting Adviser
We would like to briefly outline the changes we believe are most relevant to you.
Personal Income Tax (Personal Income Tax (IRPF))
- The reduction for employment income will now include taxpayers with a net salary from employment of up to €19,747.50 (currently, this reduction applies to net employment income of up to €16,825).
- The minimum income threshold triggering the obligation to file a tax return has been raised from €14,000 to €15,000.
- The reduction available to taxpayers filing under the simplified direct assessment method will increase to 7% (currently 5%, subject to an annual cap of €2,000).
- A 10% reduction on net income calculated under the flat-rate (módulos) assessment method has been introduced.
- The tax rate on investment income between €200,000 and €300,000 increases by one percentage point to 27%. In addition, the rate on investment income exceeding €300,000 rises to 28%.
Corporate Income Tax (CIT)
- Temporary measures in the determination of the taxable base under the tax consolidation regime: for 2023, the ability to offset losses within consolidated groups will be capped at 50%. The remaining difference will be integrated over the following 10 years.
- Reduction of the standard corporate tax rate from 25% to 23% for companies with a net turnover of up to one million euros.
Value Added Tax (VAT)
A new VAT rate applies to certain supplies, imports and intra-EU acquisitions of foodstuffs, as well as for the purposes of the equivalence surcharge.
With effect from 1 January 2023 and applicable until 30 June 2023:
- A VAT rate of 5% will apply to supplies, imports and intra-EU acquisitions of the following products:
a) Olive oil and seed oils.
b) Pasta.
The equivalence surcharge rate applicable to these transactions will be 0.625%.
- A VAT rate of 0% will apply to supplies, imports and intra-EU acquisitions of the following products:
a) Standard bread, as well as frozen standard bread dough and frozen standard bread intended exclusively for the production of standard bread.
b) Bread-making flours.
c) The following types of milk produced by any animal species: natural, certified, pasteurised, concentrated, skimmed, sterilised, UHT, evaporated and powdered.
d) Cheeses.
e) Eggs.
f) Fruits, vegetables, greens, pulses, tubers and cereals that qualify as natural products in accordance with the Food Code and its implementing regulations.
The equivalence surcharge rate applicable to these transactions shall be 0 per cent.
New solidarity tax on large fortunes
Law 38/2022 of 27 December, published in the Spanish Official Gazette (BOE) on 20 December, introduces a new Solidarity Tax on Large Fortunes applicable to net assets exceeding €3 million. The tax rate ranges from 1.7% to 3.5%. The amount effectively paid in respect of Wealth Tax may be deducted from the tax liability. This is a temporary national tax applying to the years 2023 and 2024, with the possibility of being extended or suspended thereafter.
