The consequences of the war in Ukraine and the COVID-19 pandemic were so high that, for this 2023, expectations regarding the country’s economy were low. From people’s perception, despite the fatigue of the previous year, a better growth of the current economic situation in Spain was expected. Do you want to know more? Stay until the end of this article where we will update you.
How did Spain’s economy close in 2022?
The government assured that the Spanish economy was in a good position. It was then that, in October 2022, the General State Budget Law was presented.
It was insisted, then, that 2022 would close with above-expected growth and that Spain would continue to grow much more throughout 2023.
It was also mentioned that GDP would close the year with a 4.4% increase and was expected to increase further in 2023. The predictions stated that it would reach an increase of 2.1% and would boost Spain’s current economy.
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What are the taxes implemented this 2023?
This 2023 came loaded with new taxes for the growth of the current economy of Spain. In addition to presenting other legislative tax innovations that will directly impact the economy of workers, the self-employed and large companies.
Some of these new taxes implemented for the development of Spain’s economy include:
Intergenerational equity mechanism
The intergenerational pension equity mechanism (MEI) is a tax that began to be implemented on January 1 of this year. It imposes an additional contribution of 0.6%. By dividing this percentage you will realize that 0.5% corresponds to employers and 0.1% to workers.
This means that most of the tax burden is not borne by the worker as such, but by the company that hires him/her.
A clear example of this case would be a worker with a gross salary of 2000 euros. For this worker, the tax will mean a reduction of 12 euros per month and of these 12 euros the worker will pay only 2 euros. The other 10 will be paid by the company.
On the other hand, in the case of the self-employed, the MEI would translate into an extra expense of 5 euros per month. The objective of this tax is to collect until 2032, when it will be in force, some 22,000 million euros to help the economy grow.
The new contribution system for the self-employed
This new contribution system for the self-employed came into force as from January 1, 2023 and will be adopted consecutively for 3 years. The system is made up of 15 different sections in which the contribution base and the contribution to be paid by the self-employed is determined according to their net income.
This means that the self-employed who have less income will have lower fees. Meanwhile, those with a higher income will have to pay a higher fee, obviously.
However, this should be seen in a positive way, since it is more beneficial. You will be contributing the corresponding amount to have a better pension in the future. In addition, the contribution bases can be changed every two months, so that if your income increases or decreases, you will have to pay according to the change.
Tax on large fortunes
As a method to boost Spain’s current economy, this new tax applied to large fortunes, which came into force this year and will have a temporary nature, has been introduced.
It is a tax that will only affect the 23,000 richest taxpayers in the country, that is to say, it will only apply to 0.1% of the total population. The fortunes that will be obliged to pay this tax are those that exceed 3 million euros and the payment brackets will be as follows:
Tax on banking and electricity
This new levy for the improvement of Spain’s current economy will affect 4.8% of the interest and commission margins of financial institutions whose income exceeds 800 million euros.
In the case of large energy companies, the tax will be 1.2% for those that manage to exceed 1 billion euros per year.
Personal income tax on capital income
The IRPF is one of the most important taxes and the one that achieves the highest collection in the tax system to promote the current economy of Spain. The purpose of this tax is to collect money according to the income of individuals in order to support public spending and investments.
The country’s government expects to favor those people who are in the most vulnerable situation.
Another point to highlight is that the IRPF increased by 1 point for capital income, which represents between 200,000 and 300,000 euros. This means that the tax rate was 27% and income above 300,000 euros was taxed at 28%.
Minimum cost of partnership
The minimum corporate tax was implemented in Spain as of this year, with the overall minimum collection amount being 15% for multinationals with a turnover of more than 750 million euros.
The purpose of this tax is to prevent tax evasion by large companies and, thus, not to lose a large amount of tax revenue from the main drivers of the evolution of Spain’s economy.
The tax on non-reusable plastic packaging
It is a tax that will affect certain companies, especially those in the food sector. The tax will be 0.45 euros per kilo of single-use plastic packaging.
This tax will be applied to non-recycled plastic manufactured or imported into Spain. The objective is to reduce the pollution produced in the country as a result of the misuse of plastic.
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What is the expectation for Spain so far in 2023?
It is expected that this year, Spain will make it through the recession and develop at a higher rate than the 1% it achieved in 2022. However, GDP is still likely to remain below pre-pandemic levels of 2020.
It should not be forgotten that both the war and the pandemic were a hard and unexpected blow to the Spanish economy.
However, it is also possible that we will see economic progress due to consumer confidence and a reduced supply of financing and tighter financial conditions.
What is the current inflation situation in Spain in 2023?
In February 2023, the annual variation rate of the Spanish Consumer Price Index (CPI) was 6%, one tenth of a percent higher than the previous month. The monthly variation of the CPI has been 0.9%, so that the accumulated inflation in 2023 is 0.7% until February 2023.
The 3% increase in housing prices was noteworthy, bringing their annual interest rate to -6.2%. These numbers contrast with the -1.3% decrease in prices of clothing and footwear and a year-on-year variation of 3.9%.
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