Massive tax rises for Spain in 2012

Deficit-cutting measures by the Spanish governmeNt send tax rates through the roof

The Spanish government has been trying to cut their deficit for several years now, mainly by spending cuts and tax rises. These included a 2% rise in the rate of IVA (VAT) in 2010, and a return of the wealth tax in 2011, followed by yet another rise in IVA of 3% in 2012. It seems that since a change of government in December 2011 they have been getting serious about plugging the gaping hole in the national finances with some serious tax rises.

Increased income tax rates 2012 to 2014 (applied to earned income):

  • Income band                   Previous rate      Increase         New rate
  • €0 - €17.007                         24%              0,75%          24,75%
  • €17.007 - €33.007                 28%                2%               30%
  • €33.007 - €53.407                 37%                3%               40%
  • €53.407 - €120.000               43%                4%               47%
  • €120.000 - €175,000             44%                5%               49%
  • €175.000 - €300.000             45%                6%               51%
  • over €300.000                      45%                7%               52%

Autonomous regions sometimes add more tax to these rates (see Spanish Income tax rates)

 

Increased investment income tax rates 2012 to 2014:

    • Income band                   Previous rate      Increase         New rate
    • €0 - €6.000                          19%                 2%                 21%
    • €6.000 - €24.000                  21%                 4%                 25%
    • over €24.000                        21%                 6%                 27%
    • (Dividends up to €1.500 are still tax free)

    Non-residents tax rises from 24% to 24.75%

    IBI (local taxes, the equivalent of council tax in the UK) rises from 4% to 10%, impacting more than 25 million properties in Spain. A small number of properties suffer no rise because they were built during the peak of the property boom and their official values are already high.

    The rises were supposed to be temporary, applying only to 2012 and 2013, but the mood in Spain is gloomy with no end in sight to the years of austerity and economic pain, and they have now been extended into 2014. The squeeze has also been put on local and regional governments who are being forced to cut spending and jobs. Pensions and public sector pay are also under attack.

    It is hard to see Spain growing under the combined weight of these measures, even though no one can deny that something needs to be done to reassure debt markets because of the amount of debt that Spain needs to sell to avoid going under.