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Spain’s new tax hikes: Six key changes that affect you

Spain's new tax hikes: Six key changes that affect you
Spain's Prime Minister Pedro Sánchez. Photo: OSCAR DEL POZO / AFP
The Spanish government is planning a fiscal reform which will increase personal income tax, wealth tax, inheritances, the price of diesel and more. Here’s the breakdown of a tax reform which affects all taxpayers in Spain to a greater or lesser extent.

The Spanish government has sent a report to the European Commission listing the tax increases it is planning for the first quarter of 2023, which in a nutshell will “bring Spain’s tax levels closer to the average in neighbouring countries.” 

This “Recovery, Transformation and Resilience Plan” is one of the EU’s conditions for Spain to receive €79,5 billion in subsidies until 2023.

The report does not go into great detail about how the tax increases will work in practice, but it does state which taxes will change.

Which taxes will increase in Spain? 

More taxes for mid to high earners

The Spanish government wants there to be a “gradual increase of the tax system’s maximum contribution base”, which in practice will result in a greater tax burden for those with monthly earnings greater than €2,400 net per month . 

The contribution base –  la base de cotización – is the gross monthly remuneration, including prorated bonuses, that a worker receives.

Currently, the maximum contribution base is €4,070.10 gross per month.  Workers who earn more than that amount are exempt from paying tax on the remainder of their income. 

In other words, if a person has a contribution base of €5,000 per month, they are not taxed for the extra €929.90 they’ve earned. 

This modification of the maximum contribution bases, which the Spanish government states would be carried out gradually over the next 30 years, will also cause “a modification of the maximum pension so as not to alter the contributory nature of the tax system”.

Photo: stevepb/Pixabay

Wealth tax

This forms part of Pedro Sánchez’s government plans for the country’s “tax harmonisation”, which places a heavy emphasis on wealth (patrimonio), inheritance (sucesiones) and gift (donaciones) taxes. 

These tax rates are currently decided by the Spanish State but all of the country’s 17 regions have the right to apply exemptions or conditions to make them more beneficial or detrimental to taxpayers, with the general trend being towards the former. 

READ MORE: How choosing the right region in Spain can save you thousands in inheritance tax

This could soon change, however.

“In the area of ​​taxation on wealth, there are significant improvements to be made, both from a technical point of view and from the perspective of implementing a coherent redistributive policy at a national level,” reads the government document.

There is a “need to apply wealth taxation in a more coordinated way between the different regions to guarantee a minimum and coordinated level of taxation, avoiding harmful tax competition between the different autonomous communities”.

The end of couples’ joint tax return on personal income?

La declaración conjunta, which allows couples who are married or with children to file their personal income tax return together, has been making national headlines in recent days after the Spanish government hinted it would gradually scrap this tax choice.

The cancellation of this tax option would affect two million households in Spain but it would be particularly detrimental for divorced people and pensioners according to financial experts.

Such has been the negative reaction to the announcement that second Deputy Prime Minister and Economic Affairs Minister Nadia Calviño has since referred to the publication of the annulment of joint tax returns as a “misprint”. 

Registration tax and road tax

La Moncloa is planning to “revise the rates that tax the registration and use of vehicles in order to adapt them to environmental standards”. 

In other words, this will likely entail the amendment or cancellation of existing tax benefits for vehicle registration and road taxes, although this is yet to be confirmed. 

Currently, vehicles with CO2 emissions that don’t exceed 120 gr/km are exempt from paying vehicle registration tax, which is decided by the regions. 

All other vehicles pay el impuesto de matriculación (vehicle registration tax) according to their CO2 level, which is between 4.75 percent and 14.75 percent of their tax base (price before applying taxes).

Spain’s road tax (el impuesto de circulación) sees drivers having to pay an annual fee decided by their municipalities, which is usually calculated based on vehicle power and type.

Photo: Rudy and Peter Skitterians from Pixabay

Diesel bonus reduction

Although the Spanish government did not state it expressly in its report, it did write of the “review of the discounts on hydrocarbons used as fuel for the progressive levelling of tax rates based on their polluting power.” 

This suggests the end of the diesel bonus and would see its taxation closer to that of petrol, which will mean that drivers with diesel vehicles will pay more to fill up the tank, about €3.45 a month per driver.

Tolls on motorways

Spain has conceded to pressure from the EU to introduce more tolls on its roads.

The Spanish government had already drafted a project to present in Brussels in which it describes how it will introduce a toll system across its network of motorways and high-capacity roads to cover their huge maintenance costs. 

They’ve since hinted at the fact that the introduction of tolls – peajes – across the entire network could take place in 2024.

As things stand, Spain is one of the countries in Europe where drivers pay the least for the use of its high-capacity road network, spending 76 percent less on tolls than the average for EU countries.


Member comments

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  1. This article is very confusing and probably needs to be corrected. In the section called “More taxes for mid to high earners” the base de cotización is referring to social security payments not income tax payments. You pay income tax on all income over the tax-free allowance you are entitled to i.e. you do pay tax on your income above €4,070,10. However, at the moment, you don´t pay social security when you go over that amount.

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