Everything you need to know about the new 2023 tax reform in Spain

Spain brings for this 2023 a new tax reform that includes several tax issues that should be known. Among them is the increase in tax burdens for large fortunes and companies, the decrease in VAT on feminine hygiene products and the increase in the reduction for work income. Stay until the end of this article and learn everything that the new 2023 tax reform in Spain implies!

What is a tax reform?

A tax reform can be defined as a process of tax modification that is usually carried out in a country in order to transform the tax system and thus implement a new economic structure in society.

New tax measures are essential to adjust or replace existing tax rules in a given nation. Generally, it is a process that must follow a series of steps, as the modification of tax legislation is complex due to multiple circumstances. 

Regulations must be made through the Legislative Branch, but the different changes will be enacted by the Executive Branch.

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What does the new 2023 tax reform consist of?

At the time, the Minister of Finance, María Jesús Montero, announced last September some of the key points of this new tax reform in Spain. Among them, the new tax on large fortunes exceeding three million euros stands out.

Likewise, capital income will have to pay more personal income tax when the capital is from 200,000 euros. 

These new fiscal measures are a joint proposal of the two political formations that make up the Government and, furthermore, are part of the budgetary agreement that is expected to be definitively closed. This was pointed out by the Minister of Finance in a press conference.

As a result of these and other measures, the government expects to raise an additional 3,144 million euros, most of which will be used for the purpose of fighting inflation.

What are the new tax measures proposed by the new 2023 tax reform?

The new tax reform brings with it a package of new measures that are essential to know if you are in the business world. Below we detail each one of them:

Solidarity tax on large fortunes

The introduction of this new tax will be temporary and will be imposed in the next years, 2023 and 2024. However, a very frequent question is whether all owners of large fortunes will have to pay the same tax. The answer is no, as the tax will be divided into three segments:

• 3 to 5 million of net wealth will pay 1.7%.
• 5 to 10.6 million of net wealth will pay 2.1%.
• Over 10.6 million net wealth will pay 3.5%.

This new tax will be exempted for incomes under 3 million in patrimony. Given the above, a taxpayer with a net worth of 3,000,001 euros will only pay 1.7% with respect to the euro exceeding 3 million with 1.7 cents. 

For its part, the income of 11 million euros, will mean that the taxpayer will not have to pay any charge for the first 3 million. Therefore, he must pay 1.7% on the next 2 million (34,000 euros), 2.1% for the next 5 million (34,000 euros), ending with 3.5% on the last million (35,000 euros). 

In the end, the overall bill considering the tax as a whole would reach 174,000 euros.

VAT reduction

The 2023 tax reform also contemplates a VAT reduction. This will consist of a reduction in the rate from 10% to 4% on ladies’ toiletries. 

This is a measure that is covered by the law of integral guarantee for sexual freedom. Its name is ‘only yes is yes’ and it was promoted by the Government until its definitive approval in the Cortes Generales.

This VAT reduction would also apply to condoms and non-medicinal contraceptives.

Tax on the self-employed and corporations

The new taxes will experience an increase of 5% in the net yield corresponding to the modules for self-employed. With this, the reduction of deductible expenses concerning taxation under the reduced direct estimation regime will be increased from 5% to 7%. 

It is a tax that will help some 577,000 self-employed workers. As a result, it will lead to a fiscal austerity of 184 million euros.

Regarding companies, a nominal rate reduction is established, which will go from 25% to 23%. Specifically, it will be for small companies with revenues below one million euros. 

The expected result is to raise 292 million euros, which will benefit more than 400,000 firms throughout Spain.

Savings income

With the entry into force of the new 2023 tax reform, savings income will be raised by one percentage point for those incomes exceeding 200,000 euros. Meanwhile, between 26%, 27% and 28% will go to taxpayers who have more than 300,000 euros.

The tax credit will continue to exist, but it may be deferred and there will be the possibility of deducting it. It should be noted that this measure has been approved, although it is expected that an international agreement will be established with respect to the minimum rate of 15% for multinational companies. 

It is estimated that the tax collection will amount to 2,500 million. In addition, the nominal rate is reduced from 25% to 23% for some 407,000 SMEs with a turnover of at least one million euros, with a financial impact of 292 million.

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How does the tax reform affect individuals and companies?

The main affected party of the new 2023 tax reform is the common citizenry, but it will only be possible to know the degree of impact by breaking down each of the taxes implemented.

Solidarity Tax

Approximately 23,000 taxpayers would be affected. In order to prevent double taxation, the Government has stated that it will deduct a portion of the tax corresponding to the individual, provided that he/she has paid wealth tax in his/her Community.

Corporate income tax (SMEs) 

This mainly affects entrepreneurs who own companies with an estimated turnover of less than one million euros. Some 407,384 Spanish companies will have, as from 2023, a reduction in the corporate income tax rate.

Corporate income tax (companies)

This is one of the new tax measures that affects very few companies, only 0.2% of them. Since, about 3,609 companies are usually taxed in subsidiary companies. 

It is important to highlight that the Government has not implemented a minimum turnover requirement. Although it does consider that this segment will compete with the large forms in Spain, since most of them are taxed under this system.

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Do you need tax advice to face this new tax reform 2023 in Spain? In TAS Consultancy you can count on the best managers, ready to take your company on the best way. Contact us through tasconsultoria@tas-sl.es and schedule a free appointment, what are you waiting for?