Rising Taxes in Spain

There are a number of taxes in Spain that directly affect you: the consumer and taxpayer. Direct and indirect taxes have seen considerable increases in the last two years, in this article we take a look at these changes and see if there is anything you can do to pay less.

Everyone is aware of how hard Spain’s economy has been hit by the recession and one of the ways that has been chosen to combat “la crisis” has been by increasing a number of different taxes. The average wage in Spain is just under 23,000€ and from this wage this average person pays via national, regional and local taxes around 4000€ yearly. The main changes in taxation have been the following:

Income Tax

Taxpayers have seen five increases in income tax (IRPF) over the last three years. Even though the highest wage earners have seen the greatest increase (around 7%), those on the lowest wages have not escaped from a 0.75% increase in tax.

Sales Tax

In 2009 sales tax (IVA) was increased from 16% to 18% and then in September 2012 the reduced rate of sales tax was increased from 8% to 10% and the normal rate from 18% to 21%. However, it was not just the rates that increased but also a number of services that had originally been subject to the reduced rate were moved to the normal rate, thus adding 13% to the cost of visiting the hairdresser, theatre or cinema. Even funeral services were included in this new 21% rate group.

Local Rates

Home owners in 2012 saw an increase in their local taxes of up to 10% in some regions in Spain. Although some local councils applied a low percentage increase, this was generally in areas where official home values had been recalculated (normally increased).

Buying a House

Anyone buying a home from 2013 will not be able to include their mortgage payments on the annual tax return and additionally sales tax on new build homes was increased to 10%.

Taxes on Savings

From 2012 interest on savings (also dividends, shares, investment funds, etc) were subject to an increase in taxation: 2% more on interest up to 6000€ (from 19% to 21%), 4% more on interest up to 24,000€ (from 21% to 25%) and a new rate of 27% was introduced for higher amounts.

Special Taxes

Smokers have seen cigarette prices rise three times in the last two years. Buyers of rolling tobacco have had to meet an increase in price from 8€ to 22€ per kilo coupled with a rise in the minimum tax applied from 68.75% to 75%. The tax on spirits was increased by over 10%, from 8.30€ per litre to 9.30€, however there were no increases on beer or wine.

Lottery Wins

A brand new tax on lottery wins for prizes above 2500€ was introduced in 2013, with the rate set at 20% (see our post on the Spanish Christmas Lottery).

MSS Tips

As is common in many countries, it’s nearly impossible to avoid these tax increases. Of course, with a lower disposable income people have been spending less and many services (theatres, cinemas) have been particularly hard hit by the increase in tax and decrease in visitors. However, there are a few areas you can take a look at, such as:

– Local taxes: Many Ayuntamientos offer the possibility to pay in two installments with the first installment paid a couple of months earlier than usual and then a discount applied in the second installment – check locally.

– If you work in Spain, see about getting lunch vouchers as these are tax exempt up to 500€. Or if you have kids, take a look at our article on nursery vouchers.

– Remember to go through the Spanish court system for any personal injury claims – when these are subject to a judicial sentence they are free from tax, otherwise you’ll have to declare the amount received.

– Don’t sell your home in Spain if you’re near your 65^th birthday – any gains made after you’re 65 are not taxable.