The General State Budget Law for 2023, in force from January 1st, has implemented new features and tax modifications that are of interest to all taxpayers. In addition, a Royal Decree-Law of December 27 has also introduced some extra measures.
We will now go through the most relevant ones:
A. Corporate Income Tax
The tax rate applicable to entities with a turnover of less than one million euros in the previous tax period is reduced to 23%, only if those entities are not assets-holding entities.
B. Value Added Tax
1. The tax rate for feminine hygiene products, as well as condoms and other non-medicinal contraceptives, is reduced to 4%.
2. From 01/01/2023 to 30/06/2023, common bread and bread flour, milk, cheese, eggs, fruits, vegetables, legumes, tubers and cereals are taxed at 0%.
3. From 01/01/2023 to 30/06/2023 the tax rate for olive and seed oils, as well as pasta, is reduced to 5%.
C. Personal Income Tax
1. The amount of the reduction for obtaining earned income of taxpayers with net earned income of less than 19,747.50 euros is increased.
2. The limit of the obligation to declare for those who receive employment income from two or more payers; spousal compensatory pensions or non-exempt maintenance payments; when the payer is not obliged to withhold; or when the income is subject to a fixed withholding rate is increased to a total amount of 15,000 euros per year (previously the limit was 14,000 euros).
3. The percentage of deductible expenses for provisions and expenses of difficult justification for self-employed workers who determine their net income according to the simplified direct estimation method is increased to 7% (up to now, 5%), maintaining the limit of 2,000 euros per year.
4. The requirements to be able to apply the maternity deduction are extended, being able to apply it also those women who:
At the time of the child's birth, were receiving contributory or assistance benefits from the unemployment protection system.
At the time of the child's birth, or at any time thereafter, are registered with the Social Security or mutual insurance Company (in this case with a minimum period of 30 days of contributions).
5. In relation to real estate presumed income for non-rented properties, it will be 1.1% of the cadastral value for those properties located in municipalities in which the cadastral values have been revised, modified or determined by means of a general collective valuation procedure, provided that they have entered into force as from January 1st, 2012 (until now, when they had been revised and entered into force in the ten previous tax periods).
6. The maximum contributions that workers can make to the same social welfare instrument to which employer contributions have been made are modified. The lower of the following amounts will be applied as a maximum limit:
Ø 30% of the sum of the net income from work and economic activities received in the tax year.
Ø 1,500 euros. This limit will increase:
Up to a maximum of 8,500 euros, depending on the annual amount of the employer's contribution, provided that such increase comes from employer contributions or from workers contributions to the same social welfare instrument to which the employer contributions have been made.
Up to 4,250 euros, provided that such increase comes from:
i. Contributions to sectoral pension plans made by self-employed workers who join such plans due to their activity.
ii. Contributions to simplified employment pension plans for self-employed workers.
iii. Own contributions made by individual employers to employment pension plans or mutual benefit plans, of which, in turn, they are the promoters and participants or members, as well as those made to corporate social welfare plans or group dependency insurance of which they are the policyholders and insured.
7. Modifications in the applicable withholding tax rates:
With respect to income from work derived from the production of literary, artistic or scientific works, the withholding tax rate shall be:
In general, 15%.
7% when the total income of the previous year is less than 15,000 euros and represents more than 75% of the total income sum from economic activities and work obtained by the taxpayer in that year.
With respect to income obtained from industrial property and technical assistance, the withholding tax rate will be 19%.
As for income from intellectual property, the withholding tax rate will be:
In general, 15%.
7%:
i. When the total income corresponding to the previous year is less than 15,000 euros and represents more than 75% of the total income from economic activities and work obtained in that year.
ii. In case of income from professional activities established by regulations.
iii. In case of advances on account derived from the assignment of the exploitation of copyrights that will be accrued over several years.
You can find here the withholding tax rates foreseen for 2023.
8. The scale that applies to the part of the net savings taxable income is modified. The new applicable tax rates are as follows:
Up to 6,000 € | 19% |
From 6,001.01 up to 50,000 € | 21% |
From 50,000.01 up to 200,000 € | 23% |
From 200,000.01 up to 300,000 € | 27% |
From 300,000.01 € | 28% |
The scale applicable to Non-resident income tax payers and to posted workers (Beckham Law special regime) is also modified in the same terms with regard to dividends, interest and capital gains arising from the transfer of assets.
D. Special Tax regime for the Balearic Islands
With effect for tax periods beginning January 1st, 2023 and ending December 31st, 2028, a new tax benefit is introduced relating to the Reserve for investments in the Balearic Islands, among other measures. Specifically, this benefit affects to:
1. Corporate Income Tax payers and Non-Resident Income Tax payers who have establishments located in the Balearic Islands.
They shall be entitled to apply a reduction in the tax base of the amounts, which, in relation to such establishments, they allocate from their profits to the investment reserve, in accordance with the provisions of the regulations.
They may apply the reduction up to a limit of 90%.
2. Personal Income Tax payers that determine their net income using the direct estimation method and only with respect to income obtained through establishments located in the Balearic Islands.
They shall be entitled to apply a deduction from their gross tax liability in respect of net operating income paid into the investment reserve.
They may apply the deduction up to a limit of 80% of the part of the gross tax liability that proportionally corresponds to the amount of net income obtained from establishments located in the Balearic Islands.
E. Other social measures
In addition, a series of measures established to address situations of social and economic vulnerability have been extended, including the following:
The limitation of incrementing the rent up to 2% is extended for 2023.
An extraordinary extension of the term of rental agreements for six months from the date of termination is contemplated, applying the same terms as the current contract.
The suspension of evictions of vulnerable individuals’ main residence and families is extended until June 30th, 2023.
F. Interest rates
The legal interest rate is increased to 3.25%, as well as the interest for late payment to 4.0625%.
Please, do not hesitate to contact us if you would like to know more about the above-detailed measures.
Balagué-Sala Lawyers