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TAXES

EXPLAINED: The key changes to Spain’s 2023/2024 annual tax return

Spain's annual tax return period kicks off on Wednesday April 3rd, and there are several changes you should know about for the 2023/24 tax return, known as 'la renta' in Spanish.

Published: 2 April 2024 12:57 CEST
Updated: 6 April 2024 10:59 CEST
EXPLAINED: The key changes to Spain's 2023/2024 annual tax return
Photo: charlesdeluvio/Unsplash.

It’s that time of year again in Spain – tax season!

Personal income tax is known as IRPF in Spain (Impuesto sobre la Renta de las Personas Físicas) but most Spaniards simply refer to it as la renta because the  tax return itself is called la declaración de la renta.

This year, you must file your taxes for the previous financial year – that is to say, 2023. The campaign starts on Wednesday 3 April 2024.

From that date, you can present your taxes for 2023 online, and the campaign this year runs until July 1st.

Key dates for Spain’s 2023/24 tax return

For the 2023 fiscal year, you must file your tax return between April 3rd-July 1st 2024.

The key dates are as follows:

April 3rd – July 1st 2024: online filing
May 7th – July 1st 2024: by telephone (appointment request from 29 April-28 June)
June 3rd – July 1st 2024: in person at its offices (appointment request from 29 May-28 June)

Key changes to Spain’s 2023/24 tax return

Self-employed

As of 2024 all self-employed people (known as autónomos in Spanish) are now obliged to file a tax return, regardless of their income level. Previously, only those who earned more than €1,000 a year had to make an IRPF declaration.

Self-employed workers who are taxed in the module regime will see the reduction on net returns increase from 5 percent to 10 percent, and those who work from home can make a deduction of up to 30 percent on expenses related to their work activities.

Self-employed people taxed under the estimation system, which you can read more about here, will now be able to make an additional deduction of 2 percent, raised to 7 percent.

The types of tax deductions those on this type of regime can apply include:

  • Monthly Social Security contributions
  • Deductions for the vehicle usage (if it applies to your business)
  • Deductions for business-related training expenses
  • Special deductions, such as research and development expenses
  • Tax relief at a regional level

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Electric vehicles

Taxpayers who bought (and registered) an electric vehicle in Spain in 2023 will be able to deduct 15 percent of the total purchase value, including expenses and taxes. They can also exclude any public subsidies they have received to aid the purchase with a maximum base of €20,000.

They can also deduct 15 percent up to a maximum base of €4,000 for the installation of a charging point.

Maternity deduction

Previously, only working mothers could benefit from a deduction (€1,200 per year for each child under the age of three) when making their tax return.

Now, even if the mother was not working but collecting unemployment benefits at the time of the birth, or if she subsequently paid social security contributions for 30 days or more, she will be able to benefit from this deduction and even apply for an advance payment of €100 per month.

READ MORE: The tax deductions you get in Spain for having a child

Capital gains increases

The tax rate on capital gains income has been raised by a percentage point to 27 percent for income over €200,000.

For capital gains over €300,000, it’s been raised to 28 percent.

READ ALSO: Spain’s plusvalía tax on property sales: What you need to know

Startup companies

From 2023 onwards, deductions for new and startup companies in Spain have improved. Taxpayers may deduct from their tax liability up to 50 percent of the amounts paid for shares or holdings in new or recently created companies, the maximum deduction base being €100,000 per year.

READ ALSO: Which startups succeed in Spain (and which ones fail)?

Our journalists at The Local are not tax experts. This article is intended to be informative, but you should always seek the advice of a tax or legal expert before making decisions.

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PENSIONS

Spain needs 25 million foreign workers to keep its pensions afloat

As the retirement of baby boomers looms, Spain's ageing population and declining birth rate mean the country will need millions of foreign workers to maintain its public pension pot and reinforce the labour market, the Bank of Spain has warned.

Published: 2 May 2024 09:46 CEST
Spain needs 25 million foreign workers to keep its pensions afloat

A recent study by the Bank of Spain estimates that the country will need up to 25 million more immigrant workers by 2053 in order to combat demographic ageing and maintain the ratio of workers to pensioners in order to support the pension system.

Without an influx of more foreign workers or sudden increase in the birth rate in Spain, something that seems very unlikely, experts fear that the growing disparity between working age people and pensioners could put the public pensions system in danger in the medium to long-term.

Like in many countries in the western world, the Spanish population is ageing, with the percentage of the population over 65 years of age predicted to peak in 2050, when almost one in three will be 65 years old or older.

READ ALSO: Spain’s over 65s exceed 20 percent of the population for the first time

By 2035 around one in four (26.0 percent) of Spaniards are expected to be 65 or older. That figure is currently around one fifth of the population.

Furthermore, this is compounded by falling birth rates. Spain’s birth rate hit a record low in 2023, falling to its lowest level since records began, according to INE data. Spain’s fertility rate is the second lowest in the European Union, with Eurostat figures showing there were just 1.19 births per woman in Spain in 2021, compared with 1.13 in Malta and 1.25 in Italy.

If nothing changes, the current ratio of 3.8 people of working age for every pensioner is predicted to plummet to just 2.1 by 2053, according to INE projections.

Maintaining this ratio seems unlikely moving forward, according to the report’s conclusions, something that would put pressure on pensions without significantly increasing social security contributions among working age people.

READ ALSO: Older and more diverse: What Spain’s population will be like in 50 years

The Bank of Spain report noted that “immigrants have high labour participation rates, generally above those of natives – in 2022, 70 percent and 56.5 percent, respectively.”

In three decades’ time, the INE expects Spain to have 14.8 million pensioners, 18 million Spanish nationals of working age and 12 million foreigners. To maintain the ratio, the Bank of Spain forecasts that the working immigrant population would have to rise by more than 25 million to a total of 37 million overall.

Of course, the arrival of 25 million working-age foreigners seems unlikely, if not impossible. To achieve this, around 1 million net migrants would have to enter Spain each year (discounting departures), a figure unprecedented in recent history. To put the figure in context, between 2002 and 2022 net arrivals in Spain reached five million, roughly five times less than what would be necessary to maintain the balance between workers and pensioners.

READ ALSO: ‘Homologación’ – How Spain is ruining the careers of thousands of qualified foreigners

Putting the economics aside, even if such an increase were statistically plausible, such a surge in net migration would be contentious both politically and socially. And it’s not even certain that increased migrant flows would be able to fill the gap in working age people and bolster public pensions: “The capacity of migratory flows to significantly mitigate the process of population ageing is limited,” the Bank of Spain warned in its report. 

What these projections suggest is that Spain’s public pension system will, in coming decades, likely have to be sustained by the contribution of fewer workers overall. This likely means higher social security payments. “Migratory flows have been very dynamic in recent years, but it does not seem likely that they can avoid the process of population ageing… nor completely resolve the imbalances that could arise in the Spanish labour market in the future,” the report stated.

The problem of ageing will also be transferred to the labour market and the types of jobs filled in the future. Increased migratory flows will soften the effect, but the labour characteristics of migrants coming to Spain may not match the job market in the coming decades. The jobs of the future, increasingly digital, will likely require qualifications that many of the migrants expected to arrive in the coming years do not have.

Consequently, the Bank of Spain suggests that “without significant changes in the nature of migratory flows, it does not seem likely that… [they] can completely resolve the mismatches between labour supply and demand that could occur in the coming years in the Spanish labour market.”

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