The Spanish Government has recently passed two bills of law (one is the 2021 Budget Bill) which contain relevant tax measures, some of which will come into effect this January 2021. It is expected that the bills of law would be approved with their current wording or, otherwise, with no significant amendments. A more detailed Alert was recently sent to our clientele based in Spain. Herein, please find a very brief summary of some of the most relevant measures:
- The participation exemption regime on dividends and capital gains from qualifying subsidiaries will apply on 95% of the income (rather than the current 100% exemption). Thus, effective taxation on qualifying dividends received and capital gains generated by the Spanish parent or holding company (including those that have opted for the special ETVE tax regime) would generally be 1.25% (5% of income subject to the general corporate tax rate of 25%). In case of a multi-tier Spanish holding structure, this 1.25% tax leakage would apply at all entities in the holding chain (even if forming a tax group).
- CFC rules for corporate and individual resident taxpayers would also be applicable to “permanent establishments” abroad and the categories of “tainted passive income” are expanded and also could affect foreign holding company structures.
- The top marginal rate of Personal Income Tax is increased in two points for income exceeding 300 thousands euros (thus, the highest rate could reach 50% in certain Autonomous Communities). For so-called “savings income” (interest, dividends and capital gains out of the transfer of assets), the top marginal rate becomes 26% for income exceeding 200 thousand euros (thus, the scale of rates would range from 19% to 26%).
- For Wealth Tax, the top marginal rate increases to 3.5% for net wealth exceeding roughly 10.7 million euros in those Autonomous Communities which have not approved their own rates. Furthermore, unit-linked life insurance policies where the policyholder has no surrender rights, the mathematical provision of the policy would have to be considered as taxable wealth.
In the links below, please find two articles written by our partner Carlos Gabarró and published by the international publication Tax Notes International. Please also feel free to share then with whoever you deem might be interested.
As usual, please do not hesitate reaching out any of your contacts at Altalex to discuss all this and determine any planning alternatives before year-end.
With kind regards,
Your Team at Altalex Asesores, SL