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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

WORKING IN SPAIN

What’s the law on having two jobs in Spain?

With the current cost of living crisis, working more than one job is becoming more and more common, but what are the rules on working multiple contracted jobs in Spain and the tax implications of this?

Published: 25 June 2024 13:24 CEST
What's the law on having two jobs in Spain?

Often it’s necessary to have more than one job at a time, particularly if they don’t pay well and you’re struggling to make ends meet.

In fact, historically that is part of the reason why establishments stay open so late and why siestas were so common – because people would have one job in the morning and then go home for a rest before starting their second.

This is still commonplace today and is in fact becoming more and more popular, with the rise in the cost of living, driving an increasing number of people to take up a second job.

Whatever your reasons for having two jobs or more – to save up more money or gain extra experience and work your way up, there are some financial implications you should be aware of.

What does the law say?

Currently in Spain, there is no restriction that prevents a person from having a second job, with two contracts in two different companies, for 80 hours a week.

According to data from the first quarter of this year from the Active Population Survey (EPA) prepared by the National Institute of Statistics (INE), the number of people with a second job in Spain stands at 591,300, although according to affiliation data of Social Security, some 800,000 people have more than one position.

This trend has been seen in each quarter of the EPA since 2022 and, right now, is close to a historic number.

Categories you should be aware of

There are two types of categories when you work in multiple jobs in Spain – these are pluriempleo and pluriactividad. Pluriempleo literally means multiple employment. This is understood as a person who works as an employee in two or more companies under the same Social Security regime.

In this way, it differs from pluriactividad or multiple activities, which is when people work for others and have their own business at the same time or their second job is under a different social security regime.

For example, if you work as a hotel receptionist in the morning and then in a restaurant at night, these positions are considered to be part of the same regime, but if you work in a hotel in the morning and then as a nurse in a hospital at night, these are two different careers and therefore social security regimes.

If you’re self-employed as well as having a contract job, this is a slightly different situation. To find out more, read our guide below. 

READ ALSO – Self-employed in Spain: What are the tax rules if you do two or more jobs?

What are the tax and social security implications?

If you have two separate jobs, you are required by law to report your situation to Social Security, and to each of the companies you’re employed by.

When it comes to the Tax Agency, it’s important to note that you are obliged to submit your yearly Income Tax return (Renta), when you are paid by more than one employer and your income exceeds €22,000 per year.

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

In 2024, the maximum social security contribution base for employees has been set at €4,720.50 per month. This means, that regardless of whether your income from two positions exceeds this amount, the social security base will not be more than this.

The amount of IRPF (Personal Income Tax) must also be taken into account. If you are combining two contracts, it’s important to calculate the withholding tax.

This is because companies calculate personal income tax based on your annual compensation expectations. They do not take into account the existence of another job, so they apply the discount depending on what they are paying you only.

This means that they will keep less than what they should and when you’re filling out your Renta yearly income tax return, you will most likely have to pay the extra to make up the difference. 

In this case, you should request that both companies calculate personal income tax according to your earnings, so that you can get a good idea of the amount you have to pay working two positions.

You may also consider hiring a gestor or accountant to file your yearly tax return for you if you have a particularly complicated situation and work three or more jobs for example. 

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