Royal Decree-Law 20/2012, of July 13, 2012 on measures to ensure budgetary stability and on encouraging competitiveness, was published in the Official State Gazette on July 14, 2012. It contains new tax legislation on a range of taxes which, in some cases, amends or expands on the reforms introduced by Royal Decree-law 9/2011, Royal Decree-law 20/2011 and Royal Decree-law 12/2012, all targeted at reducing the budget deficit.
VAT rates have been changed to bring them closer to those in force in the European Union. Coming into effect on September 1, the standard 18% rate will go up to 21% and the 8% reduced rate, to 10%. The new legislation has also changed the tax rate from the reduced rate to the standard rate for certain products and services.
Changes to Spanish personal income tax include the disappearance of tax relief for acquisition of the taxpayer’s principal residence, available for taxpayers who acquired their principal residence before January 20, 2006, which will come into effect immediately in 2012. Additionally, until December 31, 2013, the fixed rate for the withholdings or prepayments applying to certain earnings has been increased from 15% to 21% and has been set at 19% from that date onwards.
The corporate income tax measures once again primarily affect large companies, which have temporarily had restrictions placed on their ability to use tax loss carryforwards and have had their payments in account increased. For all taxpayers, the maximum annual limit for credits in respect of the amortization of intangible assets with an indefinite useful life has been reduced, as had already been brought into effect in relation to the goodwill acquired with a business. Some clarifications and explanations have also been provided in relation to the rules on deductible financial expenses, which add insurance firms to the list of enterprises not eligible to deduct these expenses.
Until November 30, 2012 only, there will be a new special 10% tax on foreign-source income, similar to the 8% tax on this type of income introduced by Royal Decree-Law 12/2012, but with fewer requirements for its application.
Lastly, various changes have been made to the taxation of tobacco products, with the intention to increase tax revenues and as an instrument serving the aims of health policy. All these measures are described below.
1. VAT 1.1 Performance of construction work on real estate: taxable event 1.2 Standard and reduced rate
2. CORPORATE INCOME TAX 2.1 Borrowing costs. Restriction on deductible borrowing costs 2.2 Payments in account 2.3 Offset of tax loss carryfoward 2.4 Tax amortization of goodwill and intangible assets with an indefinite useful life 2.5 New special tax on foreign-source dividends and income deriving from the transfer of nonresident entities
3. PERSONAL INCOME TAX 3.1 Tax credit for acquisition of the taxpayer’s principal residence 3.2 Withholdings
4. SPECIAL TAXES
5. OTHER CHANGES 5.1 Events of Exceptional Public Interest 5.2 Autonomous community taxes levied on electricity supply activities or facilities