Personal income tax on high income, Equity, VAT on soft drinks or insurance, main tax increases in 2021

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Most of the main Spanish taxes will register changes or increases in the year 2021, since the personal income tax will increase on high incomes, the exemption on dividends or capital gains of subsidiaries in Companies will be limited, it will increase 1% Equity, it will increase 10% to 21% VAT for sweetened beverages, pension plan deductions will be reduced and insurance premiums will be increased.

To this will be added throughout the year the ‘Google’ and ‘Tobin’ rates, a new tax on single-use plastic containers and another on waste, as well as a rate of 15% on undistributed profits of the ‘socimi’, among others.

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These are some of the main changes and tax increases collected in the 2021 Budgets or planned outside the public accounts by the Executive for the new fiscal year, as the first step of the future in-depth tax reform that it plans to carry out once a committee of experts reviews all taxation.

The Government has constantly defended that the changes and increases approved are aimed at “high income and large companies”and they are” limited in scope “, leaving the middle and working class on the sidelines, notwithstanding that a committee of experts will be in charge of reviewing the figures to undertake a comprehensive tax reform in the future and narrow the gap of collection of about 7 points that calculates with respect to the European average.

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The Minister of Finance, Maria Jesus Montero, has repeatedly defended the need for a “progressive” system with “fiscal justice”, that “the what else do you have, pay more, and received as needed “.

Personal Income Tax, Assets and Companies

Tax news for 2021 includes a two-point increase in personal income tax for earned income of more than 300.000 euros, raising the marginal rate two points to 47%, and three points for capital income of more than 200,000 euros, up to 26%, which will affect a “reduced” number of 36,194 contributors (0.17%), with an impact of 491.4 million euros (144 million in 2021 and 346 million in 2022).

In addition, the deductions from private pension plan individual contribution to 2,000 euros, while the joint reduction limit (participant and company) is raised from 8,000 to 10,000 euros in business plans, thereby boosting business contributions and correcting the “regressivity” of these benefits. The measure will bring a collection of 580 million in 2022.

Likewise, the limits are extended in force of the autonomous modules regime for the application of the objective estimate in personal income tax and VAT.

Also increases 1% the tax for estates of more than 10 million, up to a rate of 3.5%; and the exemption in Corporation Tax on dividends and capital gains in subsidiaries is limited to 95%, which affects 1,739 companies (0.12%), except for companies with a turnover of less than 40 million during the first three years. The limitation will contribute 473 million in 2021 and 1,047 million in 2022.

Insurance premiums and VAT for sugary drinks

In turn, it increases 6% to 8% tax on insurance premiums, although it will continue in the lower part of the EU. For third-party car insurance it will cost 6.20 euros more per year and for home insurance, about 3.98 euros per year.

Además, will rise 21% VAT on sugary drinks and sweetened by being a “social commitment to rationalize responsible consumption in the child and youth population” and combat unhealthy diets, although dairy products are excepted. The increase in taxation affects the sale of these products in supermarkets, although the Consumption in bars and restaurants will continue to pay 10% so as not to harm the restoration.

Likewise, the limits for the application of the simplified and special regime of agriculture, livestock and fishing in VAT.

With all these changes, the Government plans to collect 1,862 million in 2021, 0.8% of total revenue, and foresees 2,135 million in 2022.

On the other hand, during the processing of the Budgets in Congress, the reduction of the diesel bonus was ruled out to make its taxation equal to that of gasoline, although the registration tax will go up, since the moratorium of 2018 of the WLTP (Harmonized World Procedure for the Testing of Light Vehicles) ends, a system that determines the emission and consumption figures of vehicles, which will affect the price of new vehicles and will foreseeably pay More for registration tax by showing more emissions.

On the contrary, finally The tax on hydrocarbons will not be applied either that the Executive planned and that would have affected mainly diesel vehicles, with about 2.3 euros per deposit.

New taxes on plastics and waste and law against fraud

To these increases and modifications will be added throughout 2021 changes included in other laws, with 4,223 million more tax revenue, such as the ‘Google’ rates, whose settlement will begin on April 30 on the first quarter, and ‘Tobin’, with settlement beginning from February 22 to be carried out on a monthly basis around the 20th of each month. Both taxes will come into force on January 18.

The creation of a new tax on single-use plastic packaging and a new one on waste is also contemplated, which derives from the modification of a directive that urges that in 2035 only 10% of municipal waste generated ends up in landfills and there is a “problem” in Spain due to the variety of regional taxes and waste tourism, so a national strategy will be guaranteed in dialogue with the Autonomous Communities on their management and collection.

In 2021 the measures of the anti-fraud law already approved, which will contribute 828 million and which includes the prohibition of tax amnesties, the limitation to 1,000 euros of cash payments for certain economic activities between professionals and companies, reduces the threshold to enter the list of ‘ defaulters’ or collects a higher control over the use of new technologiessuch as cryptocurrencies or a ban on dual-use software.

Sicav and social

In turn, additional requirements will be established for the ‘sicav’ to benefit from their special regime, such as requiring shareholders to have a minimum stake of 2,500 euros and the AEAT is given power to verify the requirement. For the ‘socimi’ a tax of the 15% for undistributed profits. In 2022, the new measures will contribute 50 million.

Record collection: 7.6% increase

With all these measures, the Treasury predicts that the collection of all figuress: Personal income tax (+ 7.8%) for the recovery of household income and economic activity; Companies (+ 20.7%) due to the recovery of business profits; VAT (+ 13.9%) thanks to the improvement in domestic consumption and the increase in housing transactions; and Special Taxes (+ 12.4%) for consumption.

The Government’s forecast is that tax revenue dropped 7.6% in 2020, to 196,537 million euros, the biggest drop in eleven years, but will rise 13% in 2021, up to 222,107 million.

“In-depth” tax reform and tax harmonization

In any case, the Government projects a tax reform “in depth” in line with the economic recovery, in parallel with technical work seeking a multilateral consensus postponed in mid-2021.

In parallel, it plans to address the reform of the autonomous financing system, and has already advanced its intention to undertake a tax harmonization that could occur in taxes such as Inheritance and Donations, Patrimony or Documented Legal Acts.

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