The tax reform that comes in the PGE of 2021. Or in other words, the tax measures provided for in the law on measures for the prevention of tax fraud.
The year 2021 will be a year with important changes in tax matters. Apart from the aspiration of the present Government to harmonize throughout Spain taxes such as those on Patrimony or Inheritance and Donations, an issue still in a very initial phase and which we will undoubtedly follow up, many are the tax reforms whose entry into force is imminent because they are foreseen in two laws whose parliamentary procedures for their approval are very advanced: they are the Law of Measures for the Prevention of Tax Fraud, and the Law of General State Budgets (PGE) for 2021. Below we will analyze the most relevant measures contained in each of them.
The tax reform that comes in the PGE for 2021
These are some of the measures that are on the way, as soon as the new General State Budget for 2021 is approved by the legislature.
Law on Measures for the Prevention of Fiscal Fraud
The measures contained in this law are aimed on the one hand at making fraud more difficult and tougher to punish, and on the other hand at trying to reduce litigation between the Administration and taxpayers. However, and in parallel, some of these measures involve a hidden tax increase. Thus, we can summarize the main measures as follows:
- As opposed to the previous valuation of properties currently carried out by the Autonomous Communities, it will be the Cadastre that will set the minimum reference values to be used for tax purposes. This value is expected to be higher than those currently used by the Autonomous Communities. This will have a direct effect on all those taxes where a minimum value for the properties must be taken into account. Such as Inheritance and Gift Tax, Transfer Tax, or Wealth Tax. It may also indirectly affect other taxes of great importance such as Income Tax, Tax on Assets or VAT.
- Prohibition of “dual-use software”, which is the one that allows the keeping of an official accounting and another “B” accounting, or the one that does not guarantee the integrity and not manipulation of the data. This prohibition entails important sanctions both for the production of these programs and for their use. That will involve sanctions of 50,000 euros per year in which it is used.
- Limitations on cash payments. As opposed to the current limit of 2,500 euros for residents or 15,000 euros for non-residents, it will be limited to 1,000 euros for payments between companies or professionals. The limit will be 2,500 euros for payments from individuals to companies or professionals. Or 10,000 euros for non-residents.
- Extension to non-EU residents of the treatment given to EU residents for the purposes of inheritance and gift tax.
- Obligation to report on cryptomonies in Form 720.
- Reduction of the surcharges for voluntary regularization out of time. The surcharge will be 1%, plus another 1% for each full month of delay, up to 12 months. As of the year of delay, the surcharge will be 15% plus interest on arrears computed as of the date on which said year of delay in the regularization is completed. The reduction of 25% currently existing will be maintained in the case of payment within the term of the surcharge once it has been settled by the Administration.
- Increase of the reductions for conformity and payment in term of the penalties. The reduction for payment in due time will increase from 25% to 40%. While the reduction for agreement in inspections increases from 50% to 65%. The reduction for compliance in other cases remains at the current 30%. And it will continue to be compatible and cumulative with the reduction for payment in installments.
General State Budget Law for 2021
The tax reform in the 2021 PGE also introduces relevant tax reform measures. As explained below, for the different taxes affected.
- A new upper section is added to the general state scale, applicable from 300,000 euros and which will be 24.5%. Currently, the highest state section is 22.5% and it was applicable from 60,000 euros.
- A section is added to the savings scale for liquidable bases over 200,000 euros with a tax rate of 26%. It is currently 23%.
- The reduction applicable to contributions to pension plans is reduced. It goes from a maximum of 8,000 euros to 2,000 euros per year for contributions to own plans. Meanwhile, the maximum reduction for contributions to plans of the spouse also decreases from 2,500 euros to 1,000 euros per year.
- The limits to be excluded from the objective estimate regime (“modules”) are extended to 2021
Corporate Tax (IS)
- The exemption from dividends and capital gains on the transfer of holdings, currently 100% for holdings of at least 5% or with an acquisition value of more than 20 million euros, is now 95%. And only for participations of at least 5%. However, a transitional regime of 5 years is established in which the exemption may be applied in the case of holdings with an acquisition value of over 20 million Euros but which do not reach 5% of the capital of the company in which the holding is held. This modification will mean that the dividends and capital gains currently exempt will be effectively taxed at 1.25%. Applying the general IS rate of 25% to the non-exempt part of 5%.
An exception to the above is also established, maintaining the exemption at 100% when the dividend or capital gain is obtained by non-equity companies with a Net Turnover of less than 40 million Euros. With compliance with a whole series of requirements that will mean that, in practice, this exemption can be applied on very few occasions.
- The limit on the deduction of financial expenses has also been modified. Dividends are not added to the operating profit when the acquisition value of the holdings is greater than 20 million Euros but does not represent at least 5% of the holding.
The tax reform in the PGE 2021 on other taxes
- Non-residents. The exemption for dividends distributed by Spanish subsidiaries to parent companies resident in the European Economic Area is eliminated. But only for holdings with an acquisition value of more than 20 million euros but which do not represent at least 5% of the capital of the Spanish subsidiary.
- Wealth Tax. The rate is increased to 3.5% (previously 2.5%) in the last section of the state scale (from 10,695,996.06 euros)
- VAT. the rate is increased from 10% to 21% for sweetened beverages and the limits of the simplified regime are extended to 2021 (“Modules”)
- Interest on tax arrears. They are maintained at the rate of 3.75% per year.
Shortly, as they have been definitively approved, we will inform you of the different novelties that these PGE for 2021 will include. In this way you will be able to carry out with knowledge of cause your Planning of fiscal and accounting closing for this year.