Spain’s Legislature Approves Tax Reform for 2015

In recent years, Spain has fallen behind the rest of the OECD in terms of tax reform. Its corporate income tax of 30 percent is higher than the OECD average of 25 percent and its income tax is high and very progressive compared to other member countries.

Thanks to the following new tax measures, which will enter into force from January 1, 2015, Spain’s tax system will be more in line with its trading partners’ tax systems:

  • Corporate Income Tax: Corporate income tax rate will fall from 30 percent to 28 percent from next year. It will be further reduced to 25 percent in 2016. A reduced rate of 15 percent will apply to companies formed in 2013 or 2014, for two years.
  • Personal Income Tax: The package will also reform the personal income tax regime under five bands, down from seven currently, reducing the tax burden on low-income taxpayers by about a fifth. The minimum personal income tax rate is to fall to 24.75 percent in 2015 and to 19 percent in 2016. The top marginal tax rate will fall from 52 percent to 47 percent next year. It will further fall to 45 percent in 2016 and will be levied on income in excess of EUR 60,000, down significantly from EUR 300,000 currently. Personal exemption will be set to EUR 12,000. This means that those on salaries below EUR 12,000 (known in Spain as ‘mileuristas‘) will not even have to make a tax return and will receive their gross salary in full as of next year.
  • Tax on savings income: Savings income of up to EUR 6,000 will fall from 21 percent to 20 percent in 2015 and to 19 percent in 2016. Savings income of up to EUR 50,000 will be taxed at a 22 percent rate in 2015 and a 21 percent rate in 2016. Above this threshold, the applicable rate will fall from 24 percent next year to 23 percent in 2016. These rates are also to newly apply to capital gains, removing rates more than twice as high on gains from short-term holdings.
  • VAT: VAT rates will not be increased to avoid harming consumption.

The above tax measures will be published shortly in the Official Gazette (B.O.E.).

December 1st, 2014.