Spain to Institute Tax Cuts

June 22, 2014 Taxation in Spain

tax cut in spainMADRID – Taxpayers in Spain are about to the see their total tax bills fall by a total of as much as EUR 7.6 billion, as the government moves to cut taxes for companies and individuals.

On June 21st the Minister of Finance of Spain Cristobal Montoro announced that the government will cut the rate of personal income tax and corporate income tax, after several years of heavy austerity measures and tax rises.

The tax cuts will take place over the course of the next two years, and will see the rate of corporate income tax fall from 30 percent to 25 percent.

At the same time as the corporate tax cuts, the taxes for individuals will also fall, as taxpayers with incomes exceeding EUR 300 000 will see their marginal tax rate fall from 52 percent to 45 percent, while individuals earning EUR 12 450 per year will pay a tax rate of only 19 percent, compared to the current rate of 24.75 percent.

The government estimates that following the changes to the rate of income taxes, the average tax bill for an individual will be reduced by 12.5 percent.

Cumulatively, the reduction in corporate taxes and personal taxes is expected to reduce tax payers’ liabilities by as much as EUR 7.6 billion.

According to the government’s own estimates, the tax cuts should not have a negative impact on the overall tax revenues, as the economy is growing fast enough to increase tax revenues, even with the reduced rates.