Spain: Key tax measures introduced by Spain’s General Budget for 2023

The Spanish government has recently published the draft State General Budget for 2023 which includes several relevant tax modifications. The Budget is still under discussion and can be subject to amendments. Other measures have also been announced and they are expected to come into force in 2023.

PERSONAL INCOME TAX

The Project for 2023 General Budget includes an increase of the tax rate applicable to income derived from savings (dividends, interests, capital gains, etc.).

The current tax rate applicable to this type of income ranges from 19% to 26%. According to the Project, the tax rate for income between €200.000 and €300.000 will increase from 26% to 27%, and for income over €300.000 the tax rate will increase from 26% to 28%. The same tax rates will be applicable to savings income obtained for individuals that have opted to apply the inpatriates regime.

CORPORATE INCOME TAX

The main Project’s modifications on the Corporate Income Tax Law include:

i. A reduced rate of 23% (instead of the general rate of 25%) will be applicable to Companies with a Group turnover lower than 1 million euros. The special rate is not applicable to companies which assets mainly consist of real estate.

ii. Certain economic activities carried out in the Balearic Islands are expected to benefit from some tax incentives during the fiscal years 2023 to 2028.

iii. In addition to the general limitation to offset losses, entities that form part of a tax group will only be entitled to offset 50% of the losses realized in a fiscal year against profits realized by another group entity during the same fiscal year. The remaining 50% will be carried forward. This is a temporary measure applicable to years 2023 and 2024.

SOLIDARITY TAX

The Spanish Government has announced the introduction of a new temporary wealth tax called “Solidarity Tax”. The tax will come into force in 2023 and will be applicable until 2024, with the possibility of being extended.

According to the information available, the tax will be progressive and  individuals holding assets which net value exceeds 3 million euros will be taxed at the following rates: 1.7% on assets worth between 3 and 5 million euros, at 2.1% on assets worth between 5 and 10 million euros, and 3.5% on assets worth more than 10 million euros.

To avoid double taxation, the Wealth Tax paid will be deducted from the tax due.

The government forecasts that this new tax will be imposed on approximately 23,000 taxpayers and the expected revenue will be around EUR 1.5 billion.

The draft of the regulation regarding this tax is not yet available. It is expected that a specific regulation will be published before the end of 2022.