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Tax hikes to hit residents

We all know that Spain, like many other EU countries, is in the doldrums as far as its economy is concerned and is expected to find the remedy, fast. Unsurprisingly, the PP government intends to try and address the deficit through cutting budgets and increasing revenue from taxes. A tidy sum of €8.9 billion is to be cut from government departments and €6.2 billion collected by the Tax Authority.

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Spain: Tax hikes to hit residentsFrom the most recent Agencia Tributaria bulletins we have been told that 85% of that €6.2 billion tax bill is to come from resident income tax. This affects the employed, self-employed, people with savings and retired people receiving income from outside of Spain such as pensions. It will be administered as a complimentary income tax in addition to the current 24% + income tax that residents already pay.

As you might have guessed this tax is on a sliding scale according to how much your income is:

 

Tax range Complimentary income tax   
€0 – €17.707 0.75%
€17.707 – €33.007 2%
€33.007 – €53.407 3%
€53.407 – €120,000 4%

 

The increases continue proportionally to a grand total of 7% for anyone earning more than €300,000. Serious money.

It doesn’t stop there. Central government has ordered local government to increase the council tax rate or IBI (Impuesto de Bienes Inmuebles). Properties that are above the average value for their municipality will be affected along with those whose catastral value was last reviewed before 2002. A figure of up to 10% has been indicated as the likely increase. We are told that both of these tax increases are temporary and will apply over the next two years. We shall see.

It’s not just a case of bringing the money in, it’s reducing the money out. All the different government departments will have their budgets cut too. Perhaps not essential knowledge but you might be interested to read what’s going from where:

  • Public works/ buildings – budget reduction €1.614 billion
  • Industry, energy and tourism – €1.091 billion
  • Treasury – €1.083 billion
  • Foreign affairs – €1.016 billion
  • Education, culture and sport – €485 million
  • Employment and social security – €439 million
  • Inland revenue and public administration – €432 million
  • Health, hospitals and social services – €409 million
  • Agriculture, food and the environment – €401 million
  • Defence – €340 million
  • Justice – €48 million
  • Government – €19.6 million

And we’re told this is only the start…





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Ábaco Asesores

Ábaco Asesores is a firm of lawyers and tax advisers established on the Costa Blanca in 1999. We have clients all over the world and provide legal and tax advice in seven different languages.
Website: http://www.abacoconnect.com/

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Category: Expats, Spain Expat
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