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Spain | Draft Budget Plan for 2019

On 15 October 2018, the Spanish extraordinary Council of Ministers, approved the 2019 Budget Plan which will be sent to the European Commission, and which contains an analysis of the budgetary stability objectives set forth for the next fiscal year.

Among other things, the agreement reached by the government on October 11 (hereinafter, the Budgetary Plan), is expected to lead to an increase in revenues and contains different measures of a fiscal nature.

In this regard, it is necessary to mention that said Budgetary Plan is, for now, a road map that must still pass through the relevant parliamentary procedure.

However, given its importance, in this Alert we outline the most relevant aspects of the regulatory changes to tax matters set out in said plan.

1. Corporate Income Tax

1.1. Participation Exemption regime (exemption on dividends and capital gains derived from the transfer of the shares held in non-resident entities)

Modification of the participation exemption regime, which is currently applicable to dividends and capital gains derived from the transfer of shares in non-resident entities, is proposed, so that the exemption is applied partially and not totally. In this sense, the exemption would cover 95% of the aforementioned returns. Nevertheless, since the text only mentions its application to foreign dividends and capital gains, it is unclear whether it will also affect domestic ones.  If it does indeed affect both, it will be necessary to analyse the compatibility of this measure with European Union law, since this modification could lead to prohibited differences in treatment.

1.2. Rate of Corporate Income Tax

The imposition of a minimum rate applicable to Corporate Income Tax is proposed, in order to establish a minimum effective tax of 15% for large taxpayers (18% for entities that pay taxes at the increased rate of 30% such as, among others, oil companies). 
This measure will only affect taxpayers who are taxed under the fiscal consolidation regime, and large companies, that is, those whose net turnover is equal to or greater than 20 million euros.
Finally, a proposal for a reduction of the applicable nominal rate of up to 23% is included for entities which net turnover is less than one million euros.

2. Tax on Financial Transactions

The creation of a new indirect tax is set out, the Tax on Financial Transactions, which would entail applying a tax of 0.2% on high-priced acquisitions of Spanish shares executed by financial sector operators.

In principle, this measure would only affect shares issued in Spain, whose market capitalization exceeds 1,000 million euros, and would not take into account the residence of the persons involved in the purchase transaction or the place where the shares are traded.

For these purposes, the taxpayer would be the financial intermediary that transmits or executes the purchase order, regardless of whether he acts on his own behalf or on behalf of a third party.

3. Tax on Certain Digital Services

The creation of a new indirect tax is set out, the Tax on Certain Digital Services, in order to tax the income obtained in Spain by large international companies from certain digital activities (online advertising services, online brokerage services and sales of data collected from information provided by the user).

In particular, the applicable rate would be 3% of the amount of income derived from digital activities included as a taxable event, and will only apply to legal persons - and other entities - whose net turnover exceeds 750 million euros and whose income derived from the activities affected by this tax exceeds 3 million euros in the previous calendar year.

4. Personal Income Tax

It sets out the increase of the applicable tax rate for taxpayers whose income exceeds 130,000 euros.

In particular, the general tax base shall be increased by two percent from the aforementioned amount (130,000 euros), and four percent from the excess of 300,000 euros.

Additionally, an increase of four points on the rate applicable to savings income is set out, for taxpayers that exceed the figure of 140,000 euros.

5. Wealth Tax

An increase on the Wealth Tax of one percentage point is set out, for taxpayers whose wealth exceeds 10 million euros.


Picture of Diego de Miguel
Diego de Miguel
María González
Ricardo Hector
Ricardo Héctor
Carlos Palma Arrebola
Carlos Palma
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