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TAXES

The tax changes in Spain in 2023 that you need to know about

The new year in Spain has brought with it a whole raft of new tax measures and changes that you should be aware of. Here's all you need to know.

Published: 23 January 2023 17:24 CET
Updated: 12 February 2023 09:24 CET
The tax changes in Spain in 2023 that you need to know about
Photo: Pixabay.

There are a number of new tax measures or changes to the existing system coming into force in Spain in 2023, while other temporary taxes from 2022 have been maintained.

Here are all the changes you need to know about and how they could affect you.

IRPF

This year, the Ministry of Finance will change the way they calculate the amount of Impuesto de la Renta para las Personas Físicas (IRPF) or personal income tax, you have to pay. 

In total, more than 250,000 workers will benefit from the changes and in some cases, will save more than €1,000 per year.

The government has also raised the minimum exemption from €14,000 to €15,000 to help the most vulnerable in Spanish society.

READ ALSO: Who in Spain will save €1,000 in 2023 thanks to income tax changes?

New pension fund tax

From January 1st 2023, all workers in Spain, whether salaried or self-employed, must pay a new tax through their social security contribution to help fill up Spain’s pension fund – a move that will affect over 20 million workers.

The Intergenerational Equity Mechanism (MEI), as it’s known, will be a small social security contribution intended to help balance pension financing between generations. It is hoped that the MEI will bring in around €22 billion by 2032, when it is anticipated the new tax will be lifted. 

In simple terms, if you work in Spain and thus contribute to social security, the new tax will represent 0.6 percent of your monthly salary, however, of this 0.6 percent your employer will pay 0.5 percent and you will only pay the other 0.1 percent.

READ ALSO: The new tax all workers in Spain will pay in 2023

Wealth tax

The Spanish government will maintain its so-called ‘wealth tax’, but there will be certain changes to it this year. The tax targets those with fortunes of €3 million or more.

Three brackets that have been established are a rate of 1.7 percent for fortunes between €3 and €5.3 million, 2.1 percent for wealth between €5.3 and €10.6 million, and 3.5 percent for fortunes over €10.6 million.

Savings tax

Large savings and capital income will also be taxed at a higher rate in Spain in 2023.

For taxable income over €200,000, the rate will be increased by one percent, from 26 percent to 27 percent. In addition savings of €300,000 or more will be taxed at 28 percent.

Self-employed workers

The Local covered the ongoing changes to tax system for autónomos (self-employed people) throughout 2022, including the main change that social security contributions will now be based on real income, instead of a set amount each month. 

The government has also rejigged the thresholds, but essentially anyone earning under €1,300 per month will be paying less in social security fees, with those earning €1166.70 to €1,300 a month paying just €3 less than they do now.

Those earning between €1,300 and €1,700 will pay the same amount as they do now – €294 per month, while anyone earning over €1,700 will be paying more.

According to the government, of the three million self-employed workers in Spain 2.4 million earn under €1,700 per month, meaning that the majority will see their social security contributions staying the same or reduced.

Self-employed workers in Spain will now have to choose an income bracket based on a projection of their annual net income according to a general table of base levels set by the government.

It’s as complicated as it sounds, with some accountants even unclear on exactly how this will work, but from what do know in 2023 there will be 15 different brackets of net income to calculate your social security contributions.

Tax breaks 

Several regions have announced various tax breaks for 2023, most notably Madrid. From Q1 2023, new autónomos in Madrid will have their social security fees paid for by the government for their first year of self-employed work in the region.

Recently the region also announced that it would offer tax breaks to draw foreign investment. Under the regional plan, foreigners or expatriate Spaniards will be able to deduct 20 percent of the value of their investments in real estate or financial assets from their income tax bill.

READ ALSO: Madrid region offers tax break to draw foreign investment

VAT

The Spanish government is also keeping its VAT cuts (known as IVA in Spanish) on various products. VAT on feminine hygiene and contraceptive products has been cut from 10 percent to 4 percent, as well as the temporary tax reduction on basic foods such as bread, flour, fruits or vegetables, which will be taxed at 0 percent, and to oils and pasta, which now have VAT rates of 5 percent.

These cuts are expected to last for six months.

READ ALSO: Spain axes VAT on basic foods to ease inflation pain

Banking and energy

The headline-grabbing tax measure in 2023 is a carry-over from 2022: a temporary windfall tax on banks and energy companies designed to bring €3.5 billion in extra revenue per year to help deal with the ongoing inflationary crisis.

Energy companies, whose profits have benefited hugely from the energy crisis, will have their excess profits taxed. This will generate around €2 billion per year for state coffers, and the tax will be levied at 1.2 percent on gross income for energy companies that make more than €1 billion a year.

Similarly, there is also a temporary 4.8 percent charge on banks’ net interest income and commissions in 2023 and 2024 to fund measures to ease cost of living pressures.

READ ALSO: Spain to slap windfall taxes on banks, energy firms

Plastic tax

A new tax on non-reusable plastics is also being introduced, approved at a rate of €0.45 per kilo of single-use plastic. A study by International Financial Analysts (AFI) estimates the plastic tax could generate €300 million for the Spanish state coffers.

The tax comes as part of Spain’s Waste and Contaminated Soils Law being brought in to try and decrease the use of single-use plastics, and to reduce the waste produced in landfills by 15 percent compared to 2010 levels.

READ ALSO: How Spain’s new tax on plastics will affect you

The Spanish government hopes to cut the use of food containers and single-use plastic cups by up to 70 percent by 2030.

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For members

READER QUESTIONS

Do I have to do Spain’s annual tax declaration if I arrived recently?

There’s less than a month left to file Spain’s annual tax return, so where do new arrivals stand regarding this? Are they already tax residents? What if they didn’t work in Spain last year and only arrived in 2024?

Published: 12 June 2024 16:17 CEST
Do I have to do Spain's annual tax declaration if I arrived recently?

The Spanish tax system can seem a little complicated at times. This is especially true if you’ve just arrived in the country and don’t speak the language.

A common question among newcomers to Spain is whether or not you’ll need to do an annual tax declaration if you recently arrived in the country.

The Local has covered the tax declaration, known simply as la renta in Spanish, in considerable detail before. You can find our collection of tax articles here. 

But do you have to do Spain’s annual tax declaration if you arrived recently?

The Local Spain spoke to lawyer Maryem Essadik, CEO of Spain-based Marfour International Law Firm, to find out more. 

Do people who have recently arrived in Spain have to file an income tax return?

“It depends on your status as a tax resident or non-resident in Spain, which will be determined based on the requirements provided for in Article 9 of Law 35/2006, of November 28, on Personal Income Tax (LIRPF). 

“If considered a tax resident, that person will be required to submit a Personal Income Tax return, provided that they obtain the minimum amounts to be required to submit it.”

READ ALSO:

Spanish tax residence begins after 183 days in the country. Are there any circumstances in which a person who has recently arrived in Spain (less than 183 days) has to do it?

“If a person stays less than 183 days in Spain during the fiscal year, they will generally be considered a non-tax resident in Spain, and it must be taken into account that “sporadic absences” abroad could be part of said calculation, in accordance with Article 9 of the LIRPF. 

“Additionally, a person may be considered a tax resident in Spain (even if they do not remain in Spanish territory for more than 183 days during the fiscal year) if their base of activities or centre of economic interests is located in Spain, or when your family are considered tax residents in Spain, unless the opposite is duly proven.

“The person who is considered a non-tax resident will only pay tax in Spain on the Spanish-source income obtained during the corresponding fiscal year. 

“Your obligation to file an income tax return will depend on the type of income obtained and whether the payer has applied and paid the corresponding withholding/payment on account, to the extent that they are required to do so.”

READ ALSO:

Keeping in mind that the 2024 Declaración de la Renta applies to the previous year, would they have to pay taxes in Spain for their 2023 income if for example they arrived in March 2024?

On the basis that in 2023 that person did not reside in Spain, in principle they would be considered a tax non-resident in said country. 

Therefore, as mentioned, they should only be taxed in Spain in 2023 if they obtain any income from a Spanish source.

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