Spain - Corporate, VAT, individual, and excise tax changes enacted 

Real Decreto-ley 20/2012 (Spanish) (PDF 2 MB) was published 14 July 2012 in the Boletín Oficial del Estado.

Corporate income tax

The corporate income tax changes for 2012 and 2013 include:

• A change to the loss carryforward rule, amending the amount that large companies can carry forward and apply against income in subsequent years
• Modifications to the earning stripping rule, thereby affecting the financing expense limitation amount
• Changes to the rule for determining the impairment of an intangible asset with undefined useful life, by establishing an annual maximum rate of 2%
• A special temporary tax on foreign source dividends and income derived from the transfer of a participation when the profits earned by foreign companies are not derived from business activities being conducted abroad
• An increase in the percentage of tax payments on account of the final corporate income tax liability, and a modification to the calculation of the taxable base for determining the minimum amount of these tax payments on account (the taxable base is to include 25% of what otherwise are foreign exempt dividends)

VAT

The new measures include:

• Increases in both the general VAT rate to 21% and the “reduced” VAT rate to 10%, effective 1 September 2012—however, the “hyper-reduced” (tipo impositivo reducido) VAT rate remains at 4%
• Increases in the retailers’ supplementary VAT charge rate and the flat-rate compensation rate that applies for farmers

The new provisions also reduce the categories or types of products and services that are subject to the “reduced” VAT rate, thereby increasing the numbers of products and services subject to the general VAT rate. Accordingly, the following categories of products or services are subject to the increased general VAT rate of 21%: Ornamental plants and flowers; mixed hotel / restaurant services; theatre circus and other show tickets; certain services rendered by artists (individuals) and sales of works of art; non- VAT-exempt sporting events; health, mortuary and hairdresser’s services; and digital television services.

Individual income tax

Tax changes affecting individual (personal) income tax include:

• Beginning 1 September 2012, the general withholding tax and payment rate on remittances to professionals and with respect to other income increases to 21%.
• The amount of tax compensation applied to eliminate a tax credit that otherwise applies for “habitual residence” is eliminated for those taxpayers that acquired the residence before 20 January 2006.

Excise tax on tobacco

A minimum rate of excise tax on tobacco applies for thin- and thick-gauge cigars, and the tax on cigarettes and fine-cut and rolling tobacco is increased. These changes are generally effective 15 July 2012, except for those changes that apply the excise tax on cigarettes, which will be effective 1 September 2012.

Read a July 2012 report [PDF 182 KB] prepared by the KPMG member firm in Spain for more details about these changes: Royal decree-law 20/2012, of 13 July, on measures aimed at assuring budgetary stability and promoting competitiveness