Main tax-law novelties in Spain for 2010

22 Mar Main tax-law novelties in Spain for 2010

Concerning to the Income tax of Individuals, the percentages of general tax scale stay the same but the rate applicable to savings in personal income tax has increased. The applicable rate will be 19% for the first 6,000 Euros of yield, and 21% on the excess. These tax rates, in harmony – this time – with the EU rules, are applicable to non-residents income tax payers in the case of dividends, interests and economic gains obtained in Spain, which shall be taxed at the flat rate of 19%.

The retention rate in personal income tax rises up to 19% in order to equal the new tax rate in what refers to:

a) The capital formation yields.

b) The capital gains arising from transmissions or refunds of shares and participations on collective investment enterprises.

c) The income from lease or sublease of urban real estate.

This new type of retention will also apply to retentions and advanced tax payments relating to corporation tax.

Equally controversial than when it was approved has been the removal of the 400 Euros tax deduction applicable to income from work performance and economic activities for those taxpayers with taxable amount exceeding 12,000 Euros. The effect we have seen in the payroll of Spanish workers from last January.

To encourage recruitment, the new rules in the area of personal income tax and only for the 2009-2011 tax periods bring a tax reduction on the NET performance of economic activities in case of creation or maintenance of job. This measure has retroactive effect as of 1 January 2009. In order to qualify, the next requisites are needed: I) exercise of an economic activity, II) business total turnover for all economic activities performed of less than EUR 5 million, III) less than 25 employees, IV) maintenance or creation of employment in such exercises. The new rules implement a reduced type of tax charge for 2009 to 2011 periods if the above requirements are met. The scale of tax applied to these entities is as follows:

I) Tax base between 0 and 120,202.41: 20%

II) Excess: 25%

Could the Spanish Football League still attract the best in the world once the special legal arrangements for Inpatriated people or “Beckham law” has been modified with effect 1 January 2010? In this respect the novelty is that those workers whose predictable fees will exceed 600,000 Euros per year shall not be eligible for the special scheme of taxation (flat rate of 24%).

It is provided that with effect from 1 July 2010, despite criticism emanating from all sectors, an increase in the rate of general Value Added Tax from 16% to 18% is taking place. On the other side, the reduced tax rate will raise from 7% to 8%.