New tax measures proposed in Spain

The Government discloses details of tax proposals affecting corporate and private clients
New tax measures proposed in Spain
November 15, 2022

As pointed out in our previous post Tax measures in the draft General State Budget Act for 2023, the Spanish Government intends to pass additional tax measures focused on energy companies and banks before the end of the year. However, it will also use this new tax act for introducing other far-reaching amendments.

The Government’s proposed wording for these new measures has been recently published as part of their parliamentary process. Below is a summary of these proposals that specifically address wealth tax and corporate taxpayers. In any event, these may be amended before they are finally approved.

  • Wealth tax

Spanish wealth tax applies to individuals that are residents in Spain on their worldwide assets and to non-resident individuals on their assets located in Spain. Currently, a non-resident individual that owns shares in a non-Spanish entity is not subject to wealth tax, even if the value of those shares arises from Spanish assets, as the Spanish courts and tax authorities have upheld.

Now, the Government intends to amend wealth tax rules so that shares whose value mainly arises from Spanish real estate will be considered assets located in Spain, and therefore subject to tax. In any case, domestic and treaty-based exemptions may apply.

On the other hand, in order to raise additional revenue but also to harmonize wealth taxation among Spanish regions, the Government also seeks to introduce a new tax for high-net-worth individuals. In particular, taxpayers whose net worth exceeds €3.7 million would be taxed on a worldwide basis, and non-resident taxpayers whose net worth exceeds €3 million only on Spanish assets.

Tax rates would start at 1.7% and would range up to 3.5% (above €10.7 million), although any wealth tax paid in Spain or abroad would be creditable against this new tax. Such a configuration is likely to have a greater impact for resident taxpayers living in regions with friendly wealth tax regulations (e.g., Madrid and Andalusia) and for non-residents taxpayers whose main assets are located there, as the new tax would work as a minimum top-up tax.

This new tax is foreseen as a two-year temporary measure, so if passed before year-end, it would only be levied based on a high-net-worth individual’s wealth as of December 31, 2022 and December 31, 2023. However, depending on the circumstances, the proposed wording of the new act raises the possibility of extending this new tax beyond those two years. No information has been provided on filing deadlines, but non-resident individuals may need to appoint a tax representative before the Spanish authorities.

In any event, this proposal highlights the importance for taxpayers to review their wealth tax situation, as some specific limits and exemptions may apply.

  • Corporate tax

The Spanish Government intends to introduce a couple of amendments to the corporate income tax regulations.

One is a relevant limitation introduced in the special tax regime for groups (tax consolidation), although only for tax periods starting in 2023. According to current rules, the group’s tax base is determined by aggregating the individual tax bases of the group entities, so positive and negative results are offset. However, the proposed wording qualifies this aggregation, as positive tax bases would be fully computed, but only half of the negative tax bases would be added. The remaining amount of negative tax bases would be offset in the following tax periods.

Other tax amendments affecting the cultural sector are proposed. Those amending tax regulations and simplifying the structuring of productions (movies, tv shows, music events and theatres) would apply as of 2022, while others, such as the foreseen increase in the maximum amount of tax deductions for movies and tv shows, would start applying in 2023.

November 15, 2022