The Committee of Experts advising the Government of Spain submits their proposals on tax reform


19 Mar. 2014

A Committee of Experts submitted last Friday March 14th a total of 125 proposals for tax reforms.

The Spanish Government has already announced that theses proposals will be taken into consideration, subject to further study and definitive approval, thus some recommendations will be followed by the Government and some not.

We inform you on this issue as the proposals submitted might be relevant -should they be finally approved- if you are considering your tax position in Spain.

Resident non domiciled (residente no habitual)

Proposal nº 32 and 33 of the report is dedicated to Non Resident Income Tax Act. The experts compare the Spanish special fiscal regimen for individuals moving to Spain for work reasons with the non-domiciled system already existing in countries such as Portugal, Malta, Italy and France.

Proposal nº 32 suggests the following changes:

  1. a) Increasing the scope of the special regimen to directors, shareholders, pensioners and those receiving passive income from financial assets or from real estate properties.
  2. b) To eliminate the limit of 600.000 euros per year on income.
  3. c) To eliminate the requirement of income obtained abroad to be lower than 15% of the job income or at least to increase the requirement to 50%.
  4. d) Establishing the requirement of not being resident in Spain for a period of 5 years prior to moving to our country.
  5. e) To apply this special regimen for up to 10 years.
  6. f) To eliminate taxation on imputed income on real estate.
  7. g) To apply the lowest tax rate for Personal Income Tax on pensions.
  8. h) To apply the reduction on main home for Inheritance Tax purposes.
  9. i) To simplify or relieve from the obligation to report on foreign assets unless relevant for anti money-laundry purposes.

According to current Law, taxpayers qualifying to apply for this special regimen are entitled to chose being taxed as non-resident meaning to be taxed only on Spanish income and assets for Personal Income Tax, Wealth Tax and Inheritance Tax. With no obligation to report on foreign assets (Tax Form 720). The proposal is aimed to make this special regimen more competitive and attractive than neighboring countries.

Proposal nº 33 suggests simplifying the administrative procedure for obtaining the fiscal identification number (NIE), without the need of attending at the Police offices.

JC&A Abogados has had the opportunity to contribute to these two proposals, providing our comments and suggestions through the contacts at DOM3, and we are proud to learn that our proposals have been taken into account in the report.

Wealth Tax abolition and Inheritance Tax harmonization

Furthermore, the Committee has proposed to eliminate definitively the Wealth Tax and to harmonize Inheritance and Gift Tax establishing a minimum legal taxation in Spain ranging from 4 to 10%.

Experts have also suggested to reduce or eliminate the Transfer Tax and Stamp Duties, which basically subject to taxation the transmission of assets that have been previously subject to VAT, discouraging the economy.

Reduced VAT rate of 10% only for dwelling, tourism and transport

It has been proposed to tax at 21% VAT most of the goods and services that are now taxed at 10% with the exception of dwellings, tourism and transportation.

Personal Income Tax should be simplified with fewer brackets and reducing the top tax rate to 45%. Corporate Income Tax rate should be reduced progressively from standard 30% to 20%.

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