The Spanish General Budget Act for 2021 has introduced several tax changes that aim to increase tax revenues. The national regulation was passed at the last minute, having been published on 30 December 2020 to be applied with immediate effect from 1 January 2021.
Some of the main tax measures are:
1.Personal Income Tax:
The tax rates on the savings income (dividends, interests and gains) rise from 23% to 26% for income exceeding 200,000 euro. This increased rate applies to the excess amount.
On the other hand, the general rate on a taxable income above 300,000 euro increases by two points, and likewise the maximum withholding rate on earned income, from 45% to 47% (to which must be added the increased rates introduced in the respective Autonomous Communities). The same increased rate applies to posted workers with income exceeding 600,000 euro.
Finally, the maximum deduction for contributions to pension schemes has been heavily cut from the previous amount of 8,000 euro. The maximum annual contribution is reduced to 2,000 euro, except for company pension schemes, where the maximum deductible contribution is increased to 10,000 euro in order to promote these products.
2.Corporate Income Tax:
The big change, already announced in 2020, is the reduction of the double taxation exemption on income from 100% to 95%, with effect from 1 January 2021. This measure mainly affects returns on investments in Spain through dividends and capital gains from divestments made from this year onwards.
Deductions for international economic double taxation are reduced to the same extent.
Moreover, should the purchase price of a shareholding exceed 20 million euro, but the shareholding represents less than 5% of the share capital of a Spanish entity, neither the aforementioned exemption nor the deduction for double taxation will be applicable. In order to maintain at least part of the legal protection provided by the application of this tax benefit, introduced in 2015, a transitional period has been established for those investments made prior to 2021.
In order to gradually reduce the consumption of sugary drinks, the tax rate increases from 10% to 21% for drinks with added sweeteners.
On the other hand, the special rule of effective use is no longer applicable to services deemed to be performed in the Canary Islands, Ceuta or Melilla.
Finally, the quantitative limits applied to the simplified regime in recent years are extended for the year 2021.
Following the announcement made in 2020, this tax will be reintroduced for an indefinite period. This marks a change from recent years, when the obligation to pay this tax was abolished, although the requirement to pay the tax was extended from year to year.
Finally, wealth tax rates are increased as expected; the scale applicable to the taxable base is modified, with the maximum rate increasing from 2.5% to 3.5% for estates exceeding 10,695,996 euro.