The Spanish State Budget for 2023 was approved by the Council of Ministers on 6th October 2022. The Budget needs to pass through Parliament before it becomes law and therefore changes may still be made during the Parliamentary process.

The key tax measures affecting private clients are detailed below. These measures will take effect from 1st January 2023.

1. Income Tax

Savings and Investment Income

  • The top rate of tax applying to savings and investment income will increase from 26% for income over €200,000 to 27% for income between €200,000 to €300,000, and to 28% on savings income over €300,000.

For 2023, the new tax rates for savings income will therefore be:

From

(€)

To

(€)

Tax Rate

0

6,000

19%

6,000

50,000

21%

50,000

200,000

23%

200,000

300,000

27%

Over 300,000

  

28%

Employment Income

  • The tax allowance for employment income will increase from €14,000 to €15,000.
  • A tax reduction against employment income is currently available for individuals with gross earnings of up to €18,000. This threshold will be increased to €21,000, allowing more individuals to benefit from this tax relief.

Self-Employment Income

  • Individuals who are taxed under the simplified direct method of accounting (estimación directa simplificada), which is based on actual income and expenses, are currently entitled to deduct 5% of their net income, up to a maximum of €2,000, to cover expenses that are difficult to justify. The percentage reduction will increase to 7%.
  • For individuals who are taxed under the 'modulos' system (tax on a fixed income), the percentage reduction against net income is increased from 5% to 10%.

2. Corporation Tax

  • Reduction in the rate of corporation tax from 25% to 23% for small entities with a turnover of below €1m.

 

3. New Solidarity Tax (Impuesto de Solidaridad a las Grandes Fortunas)

This new tax will apply for two tax years, in 2023 and 2024, to individuals with net wealth in excess of €3m. It will consist of progressive scale rates over three tax brackets, as follows:

Net wealth

Tax Rate

€3 - €5m

1.7%

€5m - €10m

2.1%

Over €10m

3.5%

Where an individual is liable for both wealth tax and Solidarity Tax, the wealth tax liability will be deductible from the Solidarity Tax, in order to avoid double taxation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.