2013 Budget Measures in Spain: The Good, The Bad and The Ugly

Spanish bankWithout wanting to go into too much detail regarding last week’s budget announcements, and definitely not wanting to get into politics, we just thought that we’d highlight three aspects that might be of interest for our readers.

The Good: New 2000€ grant for the purchase of energy efficient vehicles (cars and vans) – up to 75,000 units. The name of the initiative is PIVE (Programa de Incentivos al Vehículo Eficiente) and has been launched on 1 October.

Vehicles cannot cost more than 25,000€ (net cost before sales tax) and the 2000€ grant will be financed 50% from central Government and 50% by the manufacturers. To be eligible, vehicles have to belong to groups A or B and must be new or less than 12 months old (the category details can be found at the official IDAE website). Additionally you’ll have to trade in your current vehicle, which must be at least 12 years old (10 years for vans) – these vehicles will be scrapped.

Grants will be available until 31 March 2013, or until the limit of 75,000 units has been reached.

Update: The part corresponding to the government grant will be subject to tax and must be included in the 2012 tax return. The amount to be paid in tax on that 1000€ will depend upon earnings, as follows:

  • Under 17,707€/year: tax 245€
  • Between 17,707€ and 33,007€: tax 300€
  • Between 33,007€ and 53,407€: tax 400€
  • Higher amounts applicable on higher earnings, up to a maximum of 520€ on earnings of over 300,000€

However, the 1000€ financed by the manufacturers will not be subject to tax as this is treated as a reduction on the sales price.

Although the Spanish Government will theoretically finance up to 75 million euros (if the full quota of 75,000 units are bought), around one third of this amount will return in the form of income tax, sales tax and fees and taxes payable to the Traffic Office.

The Bad: The Spanish Tax Office hopes to raise an additional 824 million euros by taxing lottery winnings at a rate of 20% for all prizes above 2500€.

Previously lottery prizes were tax-free in Spain. This new tax will come into force on 1 January 2013 and will affect state-run lotteries at both national and regional level as well as draws held by the Red Cross and ONCE.

The Ugly: There will be considerable budget cuts in most ministries: Health 28%, Industry 21%, Education, Culture & Sports 17%. Civil servants will see their salaries frozen for the third consecutive year. Some students will see education grants cut by nearly 4% – including the Erasmus programme and grants to learn languages (however general education grants rise 2.4%).