In the General State Budget Laws, new measures are introduced in the tax field that modify aspects of our tax system. For the time being, and for next year, we have the Spanish Budget Act Draft for 2021 which has been published in the Official Gazette of the General Courts on October 30, 2020 and which gives us a glimpse of the meaning of the new features of the tax system for next year which are ultimately aimed at increasing tax revenues.
Below are the main modifications that will affect the following taxes:
Personal Income Tax
- A higher tax is established for higher incomes, both in the general taxable base (a new scale of charge is added in the general tax scale for taxable bases from 300,000 euros with a tax rate of 24.50%) and in the savings base which taxes capital income for taxable bases above 200,000 euros with a tax rate of 26%.
- This modification entails the consequent rectification of the scale of withholdings on labour income.
- The general limit applicable to the taxable base for contributions to pension systems is reduced (from 8,000 to 2,000 euros), although this limit is expected to be increased for business contributions (8,000 euros).
- The additional reduction for contributions in favour of the spouse is set at 1,000 euros per year (previously 2,500 euros per year)
- The quantitative limits that delimit the scope of application of the objective estimation method in personal income tax are extended for the 2021 tax period, with the exception of agricultural, livestock and forestry activities, which have their own quantitative limit by volume of income.
Corporate Income Tax
- The provision regulating the exemption on dividends and income derived from the transfer of securities representing the equity of entities resident and non-resident in Spanish territory is amended, providing that management expenses relating to these holdings are not deductible. The amount is set at 5% of the dividend or positive income obtained, so that the amount exempted will be 95% of such dividend or income.
With the same purpose as the previous amendment, the article regulating the elimination of international economic double taxation on dividends from non-resident entities is amended.
This regulation is in line with the power which, in accordance with the provisions of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, Member States retain to provide that management expenses relating to the holding in the subsidiary are not deductible from the taxable profit of the parent company, and may be fixed at a flat rate without, in this case, their amount exceeding 5 per cent of the profits distributed by the subsidiary.
For reasons of systematics, this measure must be projected over those other precepts of the Tax Law that, likewise, eliminate double taxation in the receipt of dividends or profit participations and income derived from the transfer.
In order to allow companies, with a net turnover of less than 40 million euros and which are not part of a group of companies, can grow, they will not apply the above-mentioned reduction in the exemption for dividends, limiting it to a period of three years, when they come from a subsidiary, whether or not it is resident in Spanish territory, set up after 1 January 2021.
- The exemption and elimination of international double taxation on dividends or profit-sharing and on income derived from the transfer of holdings in the capital or equity of an entity whose acquisition value exceeds 20 million euros is abolished, in order to apply these measures to situations in which there is a significant shareholding of 5 percent. In this sense, a transitional regime is established for a period of five years.
- As regards the limitation on the deductibility of financial expenses, the addition to the operating profit of financial income from holdings in equity instruments corresponding to dividends is eliminated when the acquisition value of these holdings exceeds 20 million euros.
Non-Resident Income Tax
- The exemption for interest and income obtained from the transfer to third parties of own capital, as well as the capital gains derived from movable property obtained without a permanent establishment, is in accordance with the provisions of the Agreement on the European Economic Space, so that the States that form part of the aforementioned Agreement could benefit from the exemption in the same way as the Member States of the European Union.
- The exemption relating to the profits distributed by subsidiary companies resident in Spanish territory to their parent companies resident in other Member States of the European Economic Area or to the permanent establishments of the latter located in the European Economic Area is amended, eliminating the possibility of the exemption being granted when the acquisition value of the holding exceeds 20 million euros, with the requirement of a direct and indirect holding of at least 5 per cent, provided that the remaining conditions established in the Non Resident Income Tax Law are met.
- The tax rate applicable to the last scale of charge is increased
- The maintenance of the indefinite character of its encumbrance is introduced
- Derogation of the general reduction of the tax liability and suppression of the derogation of Articles 6, 36, 37 and 38
Value Added Tax
- The tax rate for beverages containing added sweeteners is modified to the general tax rate of 21%.
- The rule of localization referring to the effective operation or use of the services in the territory of application of the tax, as provided for in Article 70.2, is modified:
- Reference is made to the Canary Islands, Ceuta and Melilla, so that these territories are given the same treatment as that of the Union for VAT purposes, returning to the situation existing before 2014.
- The health services of Article 20.1.2 are included, when they are not exempt, within the catalog of services to which this rule of effective use or exploitation applies, regardless of the recipient. Thus, whether or not the recipient is a businessman or professional, if the effective use or exploitation of these services is located in the territory where the tax applies, it will be subject to Spanish VAT.
- The excise tax rates on Hydrocarbon applicable to motor fuels used for road transport are increased.
- New headings or groups are created in the Business Tax Rates, in order to specifically classify the activities of trading of general supplies (electricity and gas), which to date lack such classification.
- A heading is created for large shopping areas that are not mainly dedicated to clothing or food and that until now have not had their own heading.
- A heading is created for the new activity of supplying energy to electric vehicles through recharging points installed anywhere, whether on public roads, gas stations, public and private garages or any other location.
Delay interest and legal interest on money
- As in previous years, the delay interest remains at 3.75% and the legal interest on money at 3%.
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