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Government presents a sweep tax reform

17 Jul 2014

With the aim of promoting the creation of jobs, enhancing the competitiveness of companies, and increasing tax fairness the Spanish Cabinet of Ministers unveiled several preliminary bills. Taxand Spain explains how they seek to overhaul the main taxes in Spain in key areas.

Corporate income tax:

  • Lowered tax rate in stages, from the current 30% down to 25% (28% in 2015) securities representing debt (fixed income) will not be deductible
  • Amendments made to the international fiscal transparency (or “CFC”) rules
  • A limit placed on the use of tax losses which can reduce the tax base up to a ceiling of 60% from 2016 onward
  • Unified treatment given to dividends and gains on holdings in Spanish resident and nonresident entities
  • Does away with certain tax credits while improving others

Personal income tax:

  • The exemption for severance pay has been deeply reduced and now is limited to €2,000 per year worked
  • The tax rates are lowered (by setting a new 45% top rate for the highest incomes) but at the same time the tax scales are modified
  • Income deferral systems such as distributing additional paid-in capital or selling subscription rights
  • The inbound expatriates regime is amended to abolish certain eligibility requirements and to do away with the €600,000 ceiling on annual income

Nonresident income tax:

  • The requirements for exempt dividend distributions and royalty payments are modified
  • The tax rates are reduced for both income obtained through a permanent establishment in line with the reduction in corporate income tax

Discover more: Spanish sweep tax reform 

Your Taxand contact for further queries is:
Vicente Bootello
T. +34 915 145 200

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Also published in Thomson Reuters' Taxnet Pro, 18 July 2014

Taxand's Take

Being a sweeping tax reform we will have to wait for the final wording of these instruments to emerge from parliament since a first reading of the preliminary bills containing the tax reform leaves many questions unanswered.

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