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In the last year, the following significant reforms have been implemented in Spanish legislation on direct taxation of individuals:
Royal Decree-Law 4/2024, approved on June 26 and published in the Official State Gazette (BOE) on June 27, 2024, expands certain measures to address the economic and social consequences of conflicts in Ukraine and the Middle East, and establishes urgent provisions in tax, energy and social matters. The main tax measures affecting the taxation of individuals are the following:
The tax incentives already established in the Municipal Property Tax (IBI) and the Tax on Economic Activities (IAE) for taxpayers on the Island of La Palma are extended during 2024.
The threshold for mandatory filing of the IAE tax return for taxpayers who earn income from work from more than one payer has increased from 15,000 euros to 15,876 euros, provided that the amounts received from the second and subsequent payers exceed 1,500 euros. This measure is effective as of January 1, 2024.
This incentive, applicable to investments in new vehicles and in new charging infrastructures for electric vehicles for professional use that come into operation during tax periods beginning in 2024, also extends to taxpayers of personal income tax who carry out economic activities in which such vehicles and infrastructures are used. When these assets are transferred, the tax amortization that exceeds that which would have been due without the application of the incentive will not reduce the acquisition value for the purpose of calculating the capital gain or loss generated by the transfer. This excess will be considered business income earned in the tax period in which the sale of the assets takes place.
Royal Decree 142/2024, of February 6, introduces modifications to the Personal Income Tax Regulations, approved by Royal Decree 439/2007, of March 30, specifically with regard to withholding and income on account.
To prevent workers who receive the interprofessional minimum wage from being subject to personal income tax withholding or taking into account, paragraph 1 of Article 81 of the Personal Income Tax Regulations is amended. This amendment establishes new amounts for work income to which withholding and account income apply, taking into account the number of children and other dependants, as well as the taxpayer's situation.
The Royal Decree raises the minimum threshold for the application of withholding from 15,000 euros to 15,876 euros. This means that workers who receive the minimum wage in 2024 will not be subject to personal income tax withholding on their payroll. In addition, workers with salaries close to the minimum wage will also experience a reduction in applicable withholding.
This measure seeks to exempt recipients of the interprofessional minimum wage from paying withholding and to reduce the tax burden for those with incomes slightly above this threshold.
Royal Decree-Law 8/2023, enacted on December 29, 2023, establishes a series of measures to mitigate the economic and social consequences of conflicts in Ukraine and the Middle East, as well as to alleviate the effects of drought. Among the most relevant provisions affecting the taxation of individuals are the following:
The limits for the application of the objective estimation method in fiscal year 2024 are extended.
The personal income tax deduction is extended for works to improve energy efficiency in homes. This measure is extended until December 31, 2024, allowing taxpayers to deduct part of the expenses on such works, with a maximum tax base of 5,000 or 7,500 euros per year, provided that certain requirements are met.
An exempt minimum of 700,000 euros is established for the purposes of solidarity tax.
The 0% VAT rate applicable to basic food products is extended until June 30, 2024, and the 5% VAT rate for olive and seed oils, as well as for pasta.
From January 1, 2024 until March 31, 2024, the electricity tax rate will be gradually increased to 2.5%. From April 1, 2024 to June 30, 2024, this rate will increase to 3.8%, thus ending the exceptional measure that was in effect from September 26, 2023 to December 31, 2023, when the tax rate was 5%.
10% VAT on international electricity and natural gas traffic
A 10% VAT rate is established for international traffic in electricity and natural gas, among others.
The possibility of requiring taxpayers to submit income tax, wealth tax and solidarity tax returns through electronic means is introduced.
Royal Decree 1008/2023, enacted on December 5, 2023, introduces several modifications to personal income tax regulations. These modifications cover aspects such as benefits in kind, the maternity deduction, the threshold for the obligation to file personal income tax returns and the regulation of the special regime for expatriates. The following are the main measures affecting individual taxation:
The threshold above which a worker is required to file an income tax return increases from 14,000 to 15,000 euros, provided that their remuneration comes from more than one employer, among other things.
The application of the maternity deduction is extended to women with children under three years of age who are unemployed or who are registered in the corresponding Social Security system. This allows more mothers to benefit from this deduction regardless of their employment situation.
The Royal Decree develops in detail the regime applicable to taxpayers who take advantage of the expatriate regime for the development of an economic activity in Spain. In addition, it establishes the requirements that family members who travel to Spain together with the main taxpayer must meet, thus ensuring greater clarity in the application of this regime.
These measures seek to update and expand the conditions under which taxpayers can benefit from certain tax deductions and regimes, adapting to new economic and social realities.
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