2015 tax changes- a summary

Well finally I have found some time in between client tasks to summarise the 2015 tax changes here !  There have been several significant tax changes and in general, and in general it looks good for the taxpayer. As I said, what else can you expect in an election year !

The tax reforms are a two year project, with stepped changes in 2015 and 2016. On this page I am looking at the immediate changes for 2015.

As always, you will find the full updated tax rates and allowances on our tax database starting www/spainaccountants.com/tax.html

Income tax

Tax bands (rates valid for Madrid)

Tax rates have decreased across the board, as follows:

From (EUR) To (EUR) State Tax % Regional Tax % Total Tax %
12,450 20,200 12.50 12.50 25.00
20,200 34.000 15.50 15.50 31.00
34,000 60,000 19.50 19.50 39.00
60,000 + 23.50 23.50 47.00

 

Personal allowances

There have been big increases in the personal allowance and children’s allowances:

 Personal allowance

Under 65 years old 5,550 Euros
65+ 6,700 Euros
75+ 8,100 Euros

Children’s allowance

First child 2,400 Euros
Second child 2,700 Euros
Third child 4,000 Euros
Each further child 4,500 Euros

 

The system for calculating the employment-related personal allowance has been changed, as follows:

For taxpayers with salaries of less than 14,450 Euros and other income less than 6,500 Euros, there are the following deductions:

Earnings not more than 11,250 3,700 Euros
Earnings 11,250 to 14,450 3,700  –  1.15625 x (Earnings – 11,250)
Earnings 14,450 + 0

In addition, there is also a general allowance of 2,000 Euros applicable independent of the income of the taxpayer.

Tax on capital gains, savings and dividends

This has been reduced across the board, as follows:

Residents

First 6,000 Euros:           20%
6,000 – 50,000 Euros:  22%
24,000 + Euros:               24%

Non-residents

First 6,000 Euros:            19%
6,000 – 50,000 Euros:   21%                                                                                       24,000 + Euros:                23%

Tax credits and deductions

The tax credit for payments to rent a property, which was applicable to low-earners, has now been abolished.

The  1,500 Euros tax free amount on dividends has now been abolished.  Further to the previous abolition of the proportionate tax credit on dividends which was much more beneficial, there is now no tax credit at all given for dividends received from Spanish companies. Although the tax on dividends has been reduced, this is rather harsh from a tax point of view, especially for companies owned by the taxpayer- as there is no compensation for the underlying company tax alread paid- so dividends are actually taxed twice.

 Company tax

As of 1st January 2015, the general rate of company tax in Spain has been reduced from 30% to 28% in 2015 and 25% in 2016.

For small and reduced-sized companies, up to 2014 there were which have now been eliminated (as the reduction in the general tax rate renders them meaningless), except for a transitory period in 2015, when the rate is 25%, except for the profit over 300k Euros for medium-sized companies where the tax is 28%.

A company is defined as small if the turnover in the previous year was less than 5 million Euros and the company has between 1 and 24 employees.

A company is defined as reduced-sized if the turnover in the previous year was less than 10 million Euros.

As of 1st January 2015, there has been introduced a new lower tax-rate for newly-formed companies which applies to the first two years in which it obtains a taxable profit. The rate is 15%.