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Update - Spanish 2023 Budget Tax Measures for Individuals — Orbitax Tax News & Alerts

As previously reported, Spain published Law 31/2022 of 23 December 2022 in the Official Gazette, which contains measures for the 2023 State Budget. Some of the main tax measures for individuals include the following:

  • The income threshold for filing individual income tax returns is increased from EUR 14,000 to EUR 15,000 for taxpayers earning employment income from more than one payer, although the threshold is EUR 22,000 if amounts obtained from the second and subsequent payer do not exceed EUR 1,500 per year;
  • The income threshold for the determination of reduced net income is increased from net employment income of EUR 16,825 to EUR 19,747.50, as long as other income does not exceed EUR 6,500, with the net income reduced as follows:
    • taxpayers with net employment income up to EUR 14,047.50: reduction equal EUR 6,498; and
    • taxpayers with net employment income over EUR 14,047.50 up to EUR 19,747.50: reduction equal to EUR 6,498 - (1.14 x (employment income after other deductions - EUR 14,047.50));
  • Amendments are made regarding the limits that apply for income reductions (deductions) for contributions to social security systems, which include:
    • reductions are limited to the lower of 30% of work/economic income or EUR 1,500 by an individual (general rule maintained);
    • reductions may be increased by up to EUR 8,500 for company and individual contributions equal to or less than the following revised limits:
      • company contribution up to EUR 500 - individual contribution limited to the company contribution x 2.5
      • company contribution of EUR 500.01 to 1,500 - individual contribution limited to EUR 1,250 + 0.25 x (company contribution - 500)
      • company contribution over EUR 1,500 - individual contribution limited to the company contribution x 1 (i.e., the same amount)
  • The prior top tax rate on savings (capital) income is increased from 26% to 27% on savings income between EUR 200,000 and 300,000 and a new top rate of 28% is introduced on income exceeding EUR 300,000;
  • A 7% withholding tax rate is provided on income from work derived from literary, artistic, or scientific works if such income is less than EUR 15,000 in the previous fiscal year and represents more than 75% of the total income from economic activities and work obtained by the taxpayer in said fiscal year (standard rate is 15%); and
  • A 15% withholding tax rate is provided on income from intellectual property, unless the aforementioned 7% rate applies or other conditions for a 7% rate are met (standard rate is 19%).

The measures apply from 1 January 2023.