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Tax Rises in Spain for 2012

Learn about the new tax rates...

At the end of 2011 the new government in Spain announced a new austerity drive to restore public finances, including the second largest tax increase in Spain’s recent history.  The Royal Decree published on 30th December 2011 sets out certain measures to reduce the public deficit.  The tax rises are so far only planned to apply for income received in 2012 and 2013.

Income Tax at Scale Rates

The tax rates have increased across the board on income in 2012 and 2013. The additional contributions are progressive so higher earners will pay a higher percentage of extra tax.  The lowest additional contribution is just 0.75 percent for income under €17,707 but it rises to 7 percent (an unheard of increase) for income over €300,000.

The tax rates for 2012 are therefore:

Income Tax Rate
€0 – 17,707 24.75%
€17,707 – 33,007 30%
€33,007 – 53,407 40%
€53,407 - 120,000 47%
€120,000 – 175,000 49%
€175,000 – 300,000 51%
Over €300,000 52%

The Community rates may vary.  For example, the total top income tax rates in Andalucía and Cataluña are now 54 percent and 56 percent respectively.

Tax on Savings Income

Progressive additional contributions are also being applied to the fixed rate charged on savings income (interest, capital gains, dividends, income from life assurance contracts and annuities), this time at rates ranging from two percent to six percent.  The new tax rates for savings income are now as follows:

Tax Rate
Up to €6,000 21%
€6,000 to €24,000 25%
Over €24,000 27%

Considering that until the end of 2009 the rate applied to all savings income was 18 percent, higher earners have seen their tax rate increase substantially in just a few years.


The flat 24 percent rate will increase to 24.75 percent for 2012 and 2013.  The 19 percent withholding tax rate increases to 21 percent.

The Deficit and Austerity Measures

When new Prime Minister Mariano Rajoy took office he was immediately faced with a budget deficit of eight percent for 2011, well above the six percent projected by the previous government and representing a shortfall of €20 billion. His government therefore had “no choice” but to apply extra-budgetary measures and announced almost €9 billion in spending cuts plus the tax increases listed above, which are expected to bring in around €6 billion.

To make matters worse on 2nd January the government said the deficit may have surpassed eight percent in 2011 so it will have to introduce further austerity measures.  Spain’s 23 percent unemployment, which produces a massive welfare bill for the government, exacerbates the problem and the government’s social security fund’s accounts are worse than feared.

Following a cabinet meeting on 5th January, a new crackdown on tax evasion was announced.  The government hopes it will bring in €8.2 billion in revenue over this year alone.

More tax inspectors will be employed; workplace inspections will rise; greater scrutiny will be applied to both corporate and individual tax returns and the size of cash payments will be limited.

Spain is committed to bringing the deficit down to 4.4 percent in 2012.  The measures announced so far are an extension of the 2011 budget and expected to be only the beginning.  A larger dose of austerity is anticipated with the 2012 budget by the end of March.

The tax rates, scope and reliefs may change.  Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change.  Tax information has been summarised; an individual must take personalised advice.

Information by Blevins Franks Tax Advisory Service
Blevins Franks is a pan-European financial advice group providing tax and wealth management services to expatriates.
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