Main tax measures for 2023

1. General State Budget Bill for 2023

The General State Budget for the year 2023 foresees a series of tax updates, which we review below, with effect from January 1st, 2023.

Personal Income Tax

• As regards income from employment, the reduction applicable for obtaining income from work is increased up to a gross annual salary of 19,747.50 euros.
• Likewise, the gross annual salary from which the obligation to file the corresponding tax return is applicable, has been increased from 14,000 euros to 15,000 euros.
• Regarding income from economic activities, the reduction for economically dependent self-employed workers is increased by the same amounts.
• For the 2023 tax period, the amount of expenses that are difficult to justify is increased to 7%, instead of 5%.
• Likewise, the reduction on the net return of modules for the period 2023 is increased to 10% during the period 2023.
• The final tax rate of the savings taxable base is increased from 26% to 27% for income exceeding 200,000 euros, and a new bracket of 28% is added for income over 300,000 euros.
• The scope of the 100-euro maternity benefit is extended to all families, eliminating the working mother requirement.
• In regards with withholding rates, a withholding and payment on account percentage of 15% is established for income from work derived from the production of artistic, literary or scientific works, as well as for income derived from intellectual property. The applicable withholding rate will be 7% when the taxpayer obtains less than 15,000 euros of income for such concept, and at the same time it represents more than 75% of the sum of income coming from employment, and from self-employed economic activities.

Corporate Income Tax

• For entities with a net turnover of less than 1,000,000 euros, the tax rate is reduced to 23%.
• Depreciation is allowed based on the coefficient resulting from multiplying by 2 the maximum straight-line depreciation coefficient provided for in the officially approved depreciation tables for investments in new vehicles FCV, FCHV, BEV, REEV or PHEV (as defined in Annex II of the General Vehicle Regulations), as long as: they are used for economic activities and start operating in the tax periods beginning in the years 2023, 2024 and 2025.

Value Added Tax

Firstly, a reduced rate of 4% is applicable to feminine hygiene products and non-medicinal contraceptives.

In relation to credits and debts that are not possible to be charged to the debtor

• The term for issuing rectifying invoices is extended from three to six months.
• The means or tools for claiming payment from the debtor are made more flexible.
• The minimum amount of the taxable base is reduced from 300 euros to 50 euros.
• Regarding insolvency claims, the recovery of VAT payments of uncollectible claims as a consequence of an insolvency process declared by a court of another Member State, is allowed.

Spanish legislation adapts to European Union legislation, in relation with the place that determined services are performed. On this basis, the following transactions are considered to be rendered in Spanish Territory (territory where the tax is applied), in accordance with the rules of place of location, as long they are not carried out in the European Union, Canary Islands, Ceuta or Melilla, but their effective use or exploitation is carried out in that territory (Spain):

• Those of leasing of means of transport, whether the recipient acts as a businessman or professional.
• The services listed in paragraph two of Article 69 of the VAT Law, provided that the recipient is not a businessman or professional and is established outside the Community, except in the case that the recipient is established or has his domicile or residence in the Canary Islands, Ceuta or Melilla, being these: assignments and concessions of copyrights, patents, licenses, trademarks and other intellectual or industrial property rights; the assignment or concession of goodwill; advertising; consultancy; data processing; translation; insurance, reinsurance and capitalization as well as financial services; personnel assignment; dubbing of films; leasing of movable tangible property; provision of access to natural gas networks; and obligations not to provide these listed services, provided that the recipient is not considered to be a businessman or professional.
• Insurance, reinsurance and capitalization operations, as well as financial services, when the recipient is a businessman or professional.

Changes are also introduced in the cases of reverse charge, being considered that VAT reverse charge mechanism applies in the following cases:

• In the case of the following supplies of goods which are considered to be exempt: supplies of goods provided through a digital interface; supplies of goods dispatched or transported outside the Community by the transferor or a third party acting in his name and on his behalf; supplies of goods dispatched or transported outside the Community by the non-established acquirer or by a third party acting in his name and on his behalf; supplies of goods to travellers subject to compliance with certain requirements; and supplies of goods carried out in duty-free stores located in airports and ports.
• Provision of real estate leasing services that are subject to and not exempt.
• Provision of real estate leasing brokerage services.

Regarding the rules for taxation of e-commerce, the VAT Law is partially amended as follows:

• It is no longer required, in order for distance sales not to be considered as made in the territory of application of the Tax, the condition that the limit of 10,000 euros of the transactions carried out in the calendar year has been exceeded, and it is also no longer required that the option of taxation at destination has not been exercised.
• It is also established that the limit of 10,000 euros will not apply when the intra-Community distance sales of goods are carried out totally or partially from a Member State other than that of establishment.

Legal interest and late payment interest

The legal interest rate will increase from 3% to 3.25% and late payment interest from 3.75% to 4.0625%.

Tax on the Increase in the Value of Urban Land

The maximum amounts of the coefficients to be applied to the value of the land at the time of accrual are modified, according to the period of generation of the increase in value.

2. Law 38/2022, of December 27, for the establishment of temporary energy taxes and taxes on credit institutions and financial credit establishments and creating the temporary solidarity tax on large fortunes, and amending certain tax regulations.

Law 38/2022 of December 27, 2022 was published in the Official State Gazette of December 28, 2022, whose main aspects are summarized below:

Solidarity Tax on Large Fortunes: this tax is introduced as a complement to the Wealth Tax.

It will tax the net wealth of individuals over 3,000,000 Euros, and which will be applied throughout the national territory, with the exception of the Basque and Navarre foral regimes. The regulation and administration of the current tax can’t be transferred to the Autonomous Communities, in contrast to what happens with the Wealth Tax. The spirit of this Tax is to be temporary, therefore, its validity is limited to two fiscal years, although a review clause is incorporated to evaluate its possible continuity in future years.

The configuration, structure and main elements of the Tax coincides with that of the Wealth Tax in most of its essential aspects. The taxable base of the tax is the net worth of the individual; specifically, this refers to the difference between the value of the assets and rights, in relation with the value of the charges, encumbrances, debts and obligations for which the individual is liable. The rules for the valuation of the assets comprising the taxpayer's net worth, are the same as those provided for in the Wealth Tax Law.

Taxpayers resident in Spain may reduce their taxable income by 700,000 euros as a minimum exemption. 

Likewise, in order to avoid double taxation, it will be allowed to deduct the total amount of the Wealth Tax paid, from the total amount to be paid of the current tax.

The exemptions, the limits on the amount of the payable personal income tax, as well as the taxpayers are the same as in the Wealth Tax, which may lead to the unconstitutionality of this tax.

Wealth Tax: The third final provision introduces an amendment to the Wealth Tax Law that affects the taxation of non-residents who pay this tax by real obligation, that is to say, for the assets and rights they own when these are located, can be exercised or are to be fulfilled in Spanish territory.

Prior to this amendment, the criteria of the Directorate General of Taxes (DGT) in its resolution of the binding consultation V1947-22, dated September 13, concluded that "Wealth Tax is not levied on the ownership of shares or participations of companies not resident in Spain that are owned by individuals not resident in Spain, who must only pay the tax on the ownership of assets and rights located, which can be exercised or must be fulfilled in Spanish territory".

However, following the modification of Article 5 of the Wealth Tax Law, non-resident individuals will be subject to both Wealth Tax and the Solidarity Tax on Large Fortunes, when they hold at least 50% of shares in these companies, whose assets are represented by real estate property located in Spanish territory; whereas, until now, this indirect holding of real estate property was not subject to these taxes.

For the purposes of determining the composition of the assets, the value of the real estate will be the highest of the following three values:

• The cadastral value
• The value determined or verified by the Administration;
• Or the price, consideration or acquisition value.

The net book value of the remaining assets of the company's assets must be replaced, for tax purposes, by the market value at the date of accrual of the tax.

The proposed legislation does not differentiate between the part of the value of the participations that refers to the value of the real estate, and the part that refers to the value of the rest of the assets. Therefore, the total value of the participation in the company will be subject to taxation, taking into account not only the real estate elements, but also the additional assets that compose the entity capital.

Corporate Income Tax: the following amendments are introduced in the Corporate Income Tax Law 27/2014, of November 27:

• In 2023, groups consolidated for tax purposes will only be able to use 50% of the tax loss carryforwards generated by their entities.

The tax loss carryforwards not deducted in 2023 will be integrated into the taxable income of the group in equal parts in each of the first ten fiscal years starting from January 1, 2024 (that is, between 2024 and 2033), in a similar way to how the temporarily non-deductible depreciations have been recovered in 2013 and 2014.

In the event of losing the tax consolidation regime or if the tax group is dissolved, the amount of the individual tax loss carryforwards pending inclusion in the taxable income of the group will be included in the last tax period in which the group is taxed under the tax consolidation regime.

• Deduction in Spanish and foreign productions: effective for tax periods beginning on or after January 1, 2023, the limits of the deductions regulated in articles 36.1 and 36.2 of this law are increased.

In particular, the maximum amount of deduction for both cases is increased to 20 million euros (previously 10 million) and, for the deduction of article 36.2 of the law (foreign productions), the limit of 100,000 euros that existed for creative personnel expenses is eliminated.

These amendments will be subject to their compatibility with EU law on State aid.

Also, the new version given by Law 38/2022 to Article 39.7 (applicable to tax periods starting from 2021) seems to annul the criterion of the binding consultation V1811-22 of the Directorate General of Taxes and establishes that financing contracts may be signed at any stage of production and that the amounts to finance production costs may be contributed at any stage prior or subsequent to the time when the producer incurs them and until the certificates are obtained.

3. Order HFP/1314/2022, of December 28, which regulates the formal obligations of the tax on non-reusable plastic packaging

Law 7/2022, of April 8, on waste and contaminated soils for a circular economy, created, effective January 1, 2023, among the fiscal measures to incentivize the circular economy, the Special Tax on non-reusable plastic packaging.

On December 30, 2022, the Order regulating the formal obligations of the Tax on non-reusable plastic packaging was published, which came into force on January 1, 2023. Specifically:

• This order approves forms 592 "Special Tax on non-reusable plastic containers. Self-assessment" and A22 "Special Tax on non-reusable plastic containers. Request for refund", and determine the form, procedure, subjects and deadlines for its filing. The electronic formats are shown in Annex I and II, respectively.
• It regulates the registration in the Territorial Registry and the characteristics of the plastic identification code (CIP), which will identify the obligors registered in the territorial registry of the excise tax on non-reusable plastic packaging.
• It regulates the requirements related to the accounting and stock registry.

4. Royal Decree-Law 18/2022, of October 18, approving measures to reinforce the protection of energy consumers and to contribute to the reduction of natural gas consumption in application of the "Plan + seguridad para tu energía (+SE)".

On October 11, the Council of Ministers adopted the "Plan Más Seguridad Energética" (Plan +SE). This royal decree-law adopts eighteen of the measures of the +SE Plan, particularly those of a regulatory nature whose effects in the short term will contribute to mitigate the effects of the energy crisis on citizens and companies and accelerate the energy transition:

Personal Income Tax

• As from January 1, 2023, the temporary scope of the deduction for energy efficiency improvement works in residential properties provided for in the fiftieth Additional Provision of the Personal Income Tax Law (LIRPF) is extended by one additional year.

Corporate income tax

• Freedom of depreciation in investments that use energy from renewable sources: a new seventeenth Additional Provision is introduced in the law, whereby taxpayers may freely depreciate investments made in installations intended for self-consumption of electricity, as well as those installations for thermal use for own consumption, provided that they use energy from renewable sources and replace installations that use energy from non-renewable fossil fuel sources and that are made available to the taxpayer as from the entry into force of Royal Decree-Law 18/2022 (October 20) and come into operation in 2023.

The maximum amount of the investment that may benefit from the free depreciation regime is 500,000 euros.

5. Royal Decree-Law 20/2022, of December 27, on 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.

The Government has approved on December 27, 2022 a Royal Decree Law with a new package of measures, published on Wednesday December 28 in the Official State Gazette, aimed at controlling prices and supporting the most affected citizens and companies in five main areas: (i) energy (ii) food (iii) transport (iv) gas-intensive industry (v) economic and financial stability (vi) social protection.

In addition, measures aimed at extending protection to families and businesses still affected by the eruption on the island of La Palma are included, as well as other urgent measures, including the following:

• Measures to reduce food prices: the VAT on essential foodstuffs (fruits, vegetables, cheeses, eggs, legumes, etc.) is eliminated and the VAT on oil and pasta is reduced from 10% to 5%, which will reduce the price of basic foodstuffs. This tax reduction will take effect from January 1, 2023 and will be maintained until June 30, 2023 or until underlying inflation falls below 5.5%.
• Reduced rate for facemasks and vaccines: resources for the prevention and diagnosis of COVID-19 will continue to be taxed at an exceptional rate. This Royal Decree-Law includes that both vaccines and diagnostic tests will continue to be taxed at 0%, while deliveries, imports and acquisitions of surgery masks will continue to be taxed at 4% VAT during the first half of 2023.
• Aid for sectors and promotion of public transport: the general 20 cents per liter of gasoline rebate is replaced by more specific measures aimed at promoting the use of public transport and aid for sectors more dependent on the use of fuels.