Spain

Over the past year, the following significant reforms have been made to Spanish law on direct taxation of individuals:

Royal Decree-Law 8/2023

Royal Decree-Law 8/2023 was enacted on 29 December 2023, bringing in measures to respond to the economic and social consequences of the war in Ukraine and the Middle East, and to mitigate the effects of drought. The most important measures contained in this legislation that affect individual taxation are:

• The limits for the application of the objective estimation method are extended for tax year 2024.
• The personal income tax (PIT) deduction for energy efficiency improvement work in housing is extended. The duration of this measure is extended until 31 December 2024, allowing the deduction of part of the work carried out by the taxpayer. The maximum tax base of this measure is 5,000 or 7,500 euros (EUR) per year, and it will be applicable if certain requirements are met.
• The minimum exemption for solidarity tax purposes is set at EUR 700,000.
• The 0% value-added tax (VAT) rate applicable to basic food products and the 5% VAT rate on olive and seed oils, as well as pasta, are extended until 30 June 2024.
• Progressive increase in the electricity tax rate from 1 January 2024 to 31 March 2024 to 2.5%, increasing to 3.8% from 1 April 2024 to 30 June 2024. This measure brings to an end the exceptional measure in effect from 26 September 2023 to 31 December  2023, by virtue of which the tax rate was set at 5%.
• Establishment of a VAT rate of 10% on international traffic of electric power and natural gas, inter alia.
• The possibility is also introduced of requiring taxpayers to submit PIT, wealth tax, and solidarity tax returns by electronic means.

Royal Decree 1008/2023

Royal Decree 1008/2023, which was enacted on 5 December 2023, establishes certain changes regarding PIT, such as regulations on benefits in kind, the maternity deduction, the threshold for the obligation to submit PIT return, and the regulation of the impatriate special tax regime, among others. The most important measures contained in this legislation that affect individual taxation are:

• The threshold requiring the employee to submit a PIT return if one’s salaries are paid by more than one employer (among other cases) increases from EUR 14,000 to EUR 15,000.
• Regarding the maternity deduction, the Royal Decree envisages the application of this deduction by women with children under three years old who are unemployed or registered under the corresponding social security regime.
• Detailed development of the content of the regime for taxpayers who apply the impatriate tax regime as a consequence of the conduct of an economic activity. Also, development of the requirements to be met by the family members moving to Spain together with the main taxpayer.

Royal Decree-Law 5/2023

Royal Decree-Law 5/2023, which was enacted on 28 June 2023, through which measures to respond to the economic and social consequences of the war in Ukraine and to support the reconstruction of the island of La Palma and other situations of vulnerability were adopted and extended, and the European Union (EU) Directives on structural modifications of trading companies and the work/life balance for parents and caregivers were transposed, ensuring the execution and compliance with EU law. The most important measures contained in this legislation that affect individual taxation are:

• The introduction of a 15% tax credit in PIT for the acquisition of new electric vehicles and the installation in real estate owned by the taxpayer of a system to charge batteries for electric vehicles, which has been extended until 31 December 2024.
• The tax benefits foreseen for the island of La Palma as regards business tax and real estate tax are extended until 31 December 2023.
• The extension until 31 December 2023 of the 0% VAT rate applicable to basic food products and the 5% VAT rate on olive and seed oils, as well as pasta, which has been extended until 30 June 2024.

Law 12/2023

Law 12/2023, enacted on 24 May 2023, on the right to housing, was published in Spain’s Official State Gazette on 25 May 2023. The main amendments included in this law that affect individual taxation are the following:

• PIT Law is amended with effect from 1 January 2024 to include the following incentives applicable to housing tenancy contracts concluded as of 26 May 2023. In this regard, the positive real estate income will be reduced by the following percentages:
  • 90% when the same lessor has entered into a new lease contract on a dwelling located in a stressed residential market area, with a reduction in the rent of at least 5% with respect to the rent of the previous agreement after the application, if appropriate, of the annual update clause of the previous contract
  • 70% when the previous requirements are not met but: (i) the lessor has rented the dwelling for the first time, it is located in a stressed residential market area, and it is rented to people aged between 18 and 35 years, or (ii) the lessee is a Public Administration or a non-profit entity that earmarks the dwelling for use as social housing at an affordable rent, for lease to people in a situation of economic vulnerability or if it is included in a public housing programme that limits the rental income.
  • 60% when the requirements above are not met but the dwelling has been subject to a rehabilitation project that has been completed within the two years prior to the date on which the housing tenancy contract is concluded.
  • 50% in all other cases.

  The above requirements must be met at the time of entering into the lease contract, and the reduction will be applicable during the period in which they continue to be met.

  All these reductions will become inapplicable if the regulation regarding the rental increase of dwellings located in a stressed residential market area is not complied with.

  A transitional regime is established in PIT according to which the housing tenancy contracts concluded before 26 May 2023 may benefit from the 60% reduction.

• The surcharge that can be applied in local real estate tax to dwellings that have been empty for more than two years may be increased to 150% if certain requirements are met. This measure aims to encourage the rent of dwellings and reduce empty real estate. 

Law 9/2023

Law 9/2023, enacted on 3 April 2023, which amends Law 12/2002, of 23 May 2002, which approves the Economic Agreement with the Autonomous Community of the Basque Country, was published in the Spain’s Official State Gazette on 4 April 2023. The main amendments included in this law that affect individual taxation is the introduction of a Temporary Solidarity Tax on Large Fortunes.

The Historical Territories of the Basque Country will have the capacity to regulate it in its entirety. To date, none of the Historical Territories has approved the corresponding regulations. Where appropriate, it will apply from 1 January 2023.

It will be levied by the competent Provincial Council or by Central Government, depending on the place where the taxpayer is subject to PIT.