Last December 23rd, 2013 the Official Spanish Gazette (B.O.E.) published the Act 22/2013 of the State General Budget for 2014. This new Act adds as usual several new tax measures detailed throughout this briefing note.
1.- Corporate Income Tax.
We highlight the following new aspects:
a) Monetary correction coefficients applicable on real estate sales. The Act updates the coefficients to correct the inflation effect on the purchase price of properties during year 2013, establishing coefficients of €2,313 for property acquired before 1984 and coefficients of €1000 for those acquired in 2013.
b) Limitations on the deductibility of several concepts. The Act establishes that impairment losses of portfolio securities and negative income obtained abroad through a permanent establishment will not be deductible and will be taxed during the fiscal year in which the transfer is carried out to third parties.
c) Tax rate reduction on Corporate Tax for maintenance or creation of employment. The application of the reduced tax rate of 20%/25% on Corporate Tax for maintenance or creation of employment is extended during year 2014 in those companies where the average staff has remained and their turnover has been less than 5 million euros and less than 25 employees. It is important to highlight that the Act 14/2013 supporting entrepreneurs and their internationalization approved a rate of 15%/20% for those entities incorporated as of January 1st, 2013 which are only applicable during the first tax period and the following, provided that the tax base is positive.
d) Incentives to promote the use of new information and communication technologies (ICT). All expenses and investments of Companies in ICT aiming to promote and familiarize their employees to their use will not be considered as remuneration in kind during the fiscal year 2014. Besides, the new General Budget Act extends the deduction on the Corporate Tax from 1% / 2% of the amount of such expenses and investments.
e) Installments payment. The rate of 18% remains for installment payments in the calculation of the last submitted tax return.
Therefore, for those entities that must calculate the installment payment based on their net income for the current year, the following rates remain in force:
– 23% for companies whose turnover ranges from 10 million to 20 million euros;
– 26% for companies whose turnover ranges from 20 million to 60 million euros;
– 29% for companies whose turnover exceeds 60 million euros.
The limits related to the offset of negative taxable bases, the deductibility of financial expenses, or the minimum tax for companies whose turnover in the previous year had exceeded 20 million euros remain the same in 2014.
2 – Personal Income Tax.
The main changes regarding Personal Income tax are the following:
a) Price-level adjustments coefficients for property sales. The applicable coefficients to properties used for business activities will be the same as mentioned in the Corporate Tax section. For all the other properties not used for such activities, the coefficients range from €1.3299 for properties acquired before 1994 and €1.0100 for those purchased in 2013.
b) Reduction of net income for maintaining employment. All managers or professional workers performing economic activities may reduce a 20% its net income, without exceeding the 50% of the total amount paid to all the employees provided that:
– The turnover is less than 5 million euros;
– Its staff is less than 25 employees and equal or higher than 1 person regarding the average of 2008.
c) Complementary levy to the state overall tax. The tax rates applied to the general tax base, ranging from 0.75% to 7% are maintained with the current Act. Additionally, it is extended the scale of rates to be applied in the savings tax base, which will continue taxing the 21%, 25% or 27%.
d) Compensation for investment incomes. In order to limit its taxation, the investment incomes derived from financial instruments contracted before the January 20th, 2006 still maintain an offset in relation to the Personal Income Tax.
e) Kinds of retention. The rate of 21% applicable on employment incomes resulting from courses, conferences, seminars, capital assets, rental of urban properties, an other professional activities, is maintained. The rate of 42% perceived it is also unaltered for incomes resulting from director and Members of the Board of Directors.
3 – Non-resident Income Tax.
The law maintains in 2014 the levy rates set for the years 2012 and 2013, the general tax of 24.75% and the 21% for dividends, investment incomes and capital gains.
4 – Wealth Tax.
In order to contribute to the reduction of the current public deficit, the Wealth Tax is maintained.
5 – Updating coefficients of cadastral values.
This new Budget Act also updates the cadastral values for 2014, affecting those properties whose values were reviewed before 2009, consequently altering all the municipal taxes that use this cadastral value as reference for its calculation, such as Real Estate Tax (IBI), the Municipal Capital Gain, etc.
6 – Interest rates.
The interest rates remain as:
– The legal interest rate for the money at 4%; and
– The interest rate for late payment at 5%.
The information contained in this note should not be regarded in itself as specific advice on the matter discussed, but only a first approach to the subject. Therefore it is highly recommended that the recipients of this note search professional advice about their particular case before taking specific measures or actions.