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2021 State General Budget Law

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8 Jan 2021

On December 31 last, Law 11/2020 was published at the Official State Gazette with new tax regulations for 2021, of which we highlight the following:

Corporate Income Tax

The tax exemption on dividends from subsidiaries to avoid double taxation is reduced from 100% to 95%. There is a grace period of three years when the company receiving the dividends has got a turnover under 40 million EUR in the precedent tax year, provided that it is not classified as a holding company (must have business activity), and the company paying the dividends was set up prior to 1 January 2021 and dividends are paid to the founding shareholder, amongst other requirements.

This tax exemption is no longer applicable to shareholders holding less than 5% of the capital even when the value of the investment exceeds 20 million EUR.

Non-Resident Income Tax

The tax exemption on interests and capital gains from mobile assets currently applicable to EU residents have been extended to EEE residents, provided that there is an exchange of tax information agreement.

The tax exemption on dividends is not applicable on shareholdings lower than 5% even if the value exceeds 20 million EUR.

Personal Income Tax

Tax rates for earned income exceeding 300.000 EUR is raised in 2 points and capital income above 200.000 EUR in 3 points. In the State tax scale it means an increase from 45% top marginal rate to 47% and from 23% to 26% for capital income. In Andalucía the tax rate on earned income goes up from current 47% to 49%.

The tax rate for impatriates (Beckham Law) applicable to taxable base above 600.000 EUR goes up from 45% to 47%, and for a saving taxable base above 200.000 EUR it rises from 23% to 26%.

Tax relief on contributions to individuals pension plans fall from 8.000 EUR to 2.000 EUR.

Wealth Tax

This tax is reinstated indefinite (abolished in 2008 and temporarily reinstated since 2012). The tax rate for fortunes in excess of 10 million EUR is raised from 2,5% to 3,5% in the State tax scale. This tax is shifted to regional governments so we have to wait for the decision of each region.

Legal interest rate is set at 3%.

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