Tax reform: what is the new 23% rate?

In order to combat inflation, the Spanish government proposed a nominal tax reform that will allow smaller companies to save up to 700 euros per year. Do you want to know more about this tax reform that will lower the nominal tax rate? Then stay with us until the end of this article!

What is the new 23% tax reform?

Last September, the coalition government announced a list of tax measures aimed at raising tax burdens for large fortunes and companies and, in turn, easing the tax burden on lower-income taxpayers.

Among the measures of this tax reform is the new 23% rate, which implies a reduction of the nominal corporate income tax (IS) rate to 23% instead of the current 25%.

If the General State Budget for 2023 is approved during the course of the current project, as of the following fiscal year, companies in the previous tax period that have had a “net turnover of less than one million euros” may be taxed at a tax rate of 23%.

It is important to mention, by the way, that this reduction in the nominal rate will not be applicable to those companies that have the character of a patrimonial entity.

In order to calculate the corporate income tax base and apply the rebate, you must take into account that this will correspond to the amount of income obtained in the tax period by the taxpayer.

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How can you calculate your company’s turnover?

If your company is part of a group, when determining its turnover, you must take into account the turnover of that particular group. To calculate it, it will be necessary to deduct intra-group operations.

Likewise, to determine the turnover you will have to:

When you have determined your turnover, you should not record sales of fixed assets used in the business, investment grants, or financial income, unless your business is engaged in providing financial services.

What to do in case you are subject to the new 23% rate?

If, when calculating your turnover, you expect your company’s turnover in 2022 to slightly exceed one million euros, you have the option of postponing any sales. You can delay the delivery of the goods or the provision of the service until the beginning of 2023.

This will help you not to reach the limit of one million euros and thus be able to enjoy the tax reform of the new rate of 23% in 2023. Remember that the turnover to be taken into account to enjoy the nominal rate reduction is that of the previous year.

In any case, if delaying your sales will mean a delay in receiving the funds, keep in mind that the financial cost of such delay may reduce the savings obtained and that taxing at 23% in 2023 may not be as beneficial.

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When will it come into effect?

The tax reform in its entirety is expected to come into force next year, i.e. in 2023. For this purpose, it should be taken into account that the tax period for the corporate income tax return coincides with the fiscal year of each entity.

However, the length of the tax year may or may not coincide with the calendar year. 

Who will be affected?

The 23% reduction will affect all those companies with a turnover of less than one million euros per year. As is well known, Spain is characterized by a large number of micro-enterprises. Currently, there are more than 1,100,000 companies with less than 10 employees in the country.

However, the companies to which the new nominal IS rate of 23% may be applied amount to 407,000 companies (according to Treasury estimates). 

In this sense, the total cost of this new measure for the Tax Agency is 292 million Euros per year. According to the Treasury, with the tax reform Spain will be able to gain economic efficiency, greater social cohesion and productivity.

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Now that you know about the tax reform and the new nominal rate of 23%, have you already calculated if your company qualifies to pay this new rate? Remember that you can contact TAS Consultoria’s advisors, who will provide you with complete advice on how to proceed with your company’s taxes, contact us through our email tasconsultoria@tas-sl.es!