Tax measures introduced by the General State Budget Law for 2021
On 31 December 2020, Law 11/2020 of 30 December on the General State Budget for 2021 was published in the Spanish Official Gazette (BOE), by which important tax measures that generally came into force last 1 January were introduced. The most relevant measures for taxes are described below.
Corporate Tax
For fiscal years beginning on or after 1 January 2021 and which have not yet ended on the entry into force of this law:
• The exemption applicable to dividends and capital gains derived from shares of at least 5% in resident or non-resident entities is reduced from 100% to 95%.
• This measure also affects the international tax transparency regime, the deduction for international economic double taxation and consolidated tax groups, which may have a cumulative cascading effect.
• The application of the exemption and deduction for double taxation is eliminated for shares in the capital or equity of entities of less than 5%, but whose acquisition value exceeds 20 million euros. However, a transitional measure is introduced allowing the application of these tax benefits until the last financial year starting in 2025, provided that the shares were acquired before 1 January 2021 and meet the requirements for this purpose, with the exception of the minimum participation of 5%.
• The exemption will be 100% for dividends received by entities which, having a turnover of less than 40 million euros, constitute their first subsidiary as of 1 January 2021, provided that they are not patrimonial entities, do not form part of a mercantile group and the participation is 100%. The total exemption may only be applied during the first three years following the incorporation of the company.
Non-Resident Income Tax
• The exemption for interest and other income obtained from the transfer to third parties of equity capital, as well as capital gains derived from movable property obtained without a permanent establishment, is applied to residents of States in the European Economic Area (EEA) with which there is an effective exchange of tax information, equating residents of such states as residents of the Member States of the European Union.
• For the application of the exemption to profits distributed by subsidiary companies resident within the Spanish territory to their parent companies resident in other Member States of the European Union or in the EEA with which there is an effective exchange of tax information, the mere participation of more than 20 million euros of acquisition value is no longer considered a parent company, and it is required a direct or indirect participation of at least 5%.
However, this exemption may be applied in the years 2021 to 2025 to shares acquired before 1 January 2021 whose acquisition value exceeds 20 million euros without requiring a minimum participation of 5%.
Personal Income Tax
• In general, it increases the taxation of a 2% in earned incomes from work over 300.000 euros, from 45% to 47%. However, the final maximum rate will depend on the Autonomous Community in which you are resident.
• Taxation for savings income increases from 23% to 26% for income over 200.000 euros.
• Taxation for inpatriates is increased, with taxation being maintained at 24% up to 600.000 euros, but rising from 45% to 47% for higher amounts. Taxation for dividends, interest or capital gains is increased a 3% for income exceeding 200.000 euros.
• Contributions to pension plans with right to a reduction in personal income tax decreased from 8,000 to 2,000 euros. However, in the event of company contributions, this limit is increased an additional 8,000 euros, provided that the contributions do not exceed 30% of the net income from work and economic activities received individually.
Wealth Tax
• The levy applicable to the last section of the rate is increased by 1 percentage point and the levy on this tax is maintained indefinitely, avoiding successive extensions.
Value Added Tax
• The tax rate for soft drinks, juices and sodas with added sugar or sweetener is increased from 10% to 21%.
Business Tax
• New headings or groups are created in the rates of the tax in order to specifically classify the activities of trading in the supply of electricity and gas, integrated mixed trade or in large retail areas, and for the activity of supplying energy to electric vehicles through recharging points.
Insurance premium tax
• The tax rate is increased from 6% to 8%.
The information contained in this note should not be considered in itself as specific advice on the subject under discussion, but only as a first approximation to the subject matter, and it is therefore advisable that the recipients of this note obtain professional advice on their particular case before adopting specific measures or actions.