
Spain’s Congress has given the green light to an ambitious tax reform that seeks to balance the tax system, increase collection, and alleviate specific strategic sectors.
On December 21, 2024, Law 7/2024 was published in the BoE, which establishes three new taxes and modifies various tax regulations.
This set of measures aims to adapt to the current economic challenges, betting on the progressivity and fair redistribution of the fiscal burden. In this article, we will tell you in detail about the main changes, their impact on different sectors, and how they will affect citizens and businesses.
Main developments of the tax reform
The three new taxes established
- Complementary tax to ensure an overall minimum level of taxation for multinational groups and large national groups.
Designed to ensure that large multinational and national groups pay at least 15% tax, in line with international rules. This tax applies to groups with income of more than 750 million euros. It responds to the need to transpose Directive (EU) 2022/2523, aligning with the OECD Model Rules.
- Tax on Interest Margin and Commissions.
The reform introduces a progressive tax on interest margins and bank commissions, which will range between 1% and 7%.
It replaces the Temporary Lien of Credit Institutions, taxing the positive margin generated by financial institutions. It accrues the day after the end of the tax period, applying throughout the national territory.
A collection of 1.5 billion euros is estimated, aimed at financing social programs and improving tax equity.
- Tax on e-liquids and other tobacco-related products.
E-cigarettes and other vaping devices will now be subject to increased taxation due to a new special tax levied on tobacco-related products, effective January 1, 2025.
This measure seeks to discourage consumption and improve public health, aligning with tobacco control policies at the international level. However, it is not applied in the Canary Islands, Ceuta and Melilla.
Modifications in Tax Rules
Changes in Corporate Income Tax
Law 7/2024 introduces several amendments to the Corporate Income Tax, detailed in various articles:
- Non-deductible expenses (Article 15): The list of non-deductible expenses is expanded, including those derived from the new Complementary Tax and the Tax on Interest Margin and Commissions.
- Capitalisation Reserve (Article 25): From 2025, the percentage reduction in the tax base will increase due to an increase in own funds. This reduction goes from 15% to 20%, and can reach up to 30% if the workforce is increased and maintained for three years (with different sections of reduction depending on the percentage of increase in the workforce).
In addition, the reduction limit increases to 25% for micro-SMEs with an INCN of less than €1 million.
Increase in workforce (%) | Percentage reduction |
2%-5% | 23% |
5%-10% | 26,5% |
Over 10% | 30% |
- Types of Lien (Article 29 and DT 44): Differentiated tax rates are applied for micro-SMEs and small entities. Micro-SMEs (with INCN of less than €1 million) will be taxed at 17% on the first €50,000 and 20% for the rest. Small entities will have a general rate of 20%, which will be progressively reduced from 2025 to 2029.
- Tax incentives for sustainable energy: A 15% deduction is introduced for the acquisition of plug-in electric vehicles purchased before December 31, 2024, and deductions are applied for the installation of recharging infrastructures in homes and companies. In addition, the freedom of amortization is established for investments in recharging infrastructures.
- Limits for large companies: Limits on the compensation of negative tax bases (BINs) are reintroduced for companies with an INCN of more than 20 million euros. The limit is 50% for companies with an INCN between €20M and €60M, and 25% for those with an INCN of more than €60M. A joint limit of 50% is also established for deductions for international double taxation.
These modifications seek to promote the capitalization and growth of SMEs, as well as to encourage energy sustainability and regulate tax offsets in large companies.
Increase in personal income tax for high incomes
One of the most relevant measures is the increase of the Personal Income Tax (IRPF) for capital income greater than €300,000, with a rate that rises to 30%. This change will affect people with higher incomes, and it is estimated that it will contribute an additional 200 million euros to the state coffers.
Aid from companies to employees affected by DANA 2024 is declared exempt. In addition, a 30% reduction is introduced for exceptional income from artistic activities, with a limit of €150,000.
Liquidable savings base (Up to euros) | Full fee (Euros) | Other payable base of savings (Up to euros) | Applicable rate (%) |
0 | 0 | 6,000 | 19 |
6,000 | 1,140 | 44,000 | 21 |
50,000 | 10,380 | 150,000 | 23 |
200,000 | 44,880 | 100,000 | 27 |
300,000 | 71,880 | Hereinafter | 30». |
VAT updates
- Since December 22, 2024, fermented milk and olive oil have been taxed at 4%.
- In line with European regulations, the reform includes new provisions to limit tax evasion in sectors such as hydrocarbons. It is required to guarantee the income of VAT for fuels extracted from tax deposits by guarantee or payment on account. Only authorised economic operators are exempt.
- Law 7/2024 introduces several additional measures, such as the creation of a public electronic invoicing solution for SMEs by the AEAT. In addition, the temporary tax on the energy sector is repealed and energy efficiency deductions are extended, allowing up to 40% in works such as the installation of solar panels. The deduction for donations is also increased to 40% if these are made consecutively to the same entity.
Discarded changes and future proposals
Although the tax package is broad, controversial measures such as the increase of the diesel tax or the creation of the Large Inheritance Tax have been left out. These proposals will be reviewed in future negotiations, depending on the results obtained with this first phase of the tax reform.
Expected impact of the tax reform
The implementation of this reform seeks to strengthen the Spanish economy through more efficient and equitable collection. Although some measures could generate tensions in sectors such as banking, relief for SMEs and incentives for the fight against tax fraud are seen as positive steps towards a fairer system.
According to experts, the success of this reform will depend on its correct application and on how possible social and political resistance is managed.
Tax reform 2024: Keys to take advantage of new tax opportunities
Tax incentives for sustainable energies and electric vehicles
One of the highlights of the 2024 tax reform is the promotion of renewable energies and electric mobility. Taxpayers will be able to benefit from significant deductions if they invest in electric vehicles or install charging points in their homes or businesses.
- Deduction for electric vehicles: 15% may be deducted from the cost of acquiring plug-in electric vehicles (BEV, PHEV, FCHV) acquired before 31 December 2024
- Recharging infrastructures: Electric vehicle charging point installations in homes or businesses will also benefit from a similar deduction, incentivizing the transition to cleaner energies.
In addition, the freedom of amortization is extended for investments in electric vehicle recharging infrastructures, allowing companies that make these investments to amortize the related expenses freely.
Tax benefits for SMEs and micro-SMES
The Government has included measures that favor small and medium-sized enterprises (SMEs), with the aim of promoting their growth and ensuring their economic sustainability. Reforms include:
- Capitalisation reserve: The percentage reduction in the tax base is increased for companies that increase their workforce. If the company increases its workforce by more than 10%, it may apply a 30% reduction.
- Type of tax: A reduction in tax rates is established for micro-SMEs, setting a rate of 17% for the first 50,000 euros of the tax base, a significant incentive for those companies with a lower turnover.
Recommendations for tax planning 2024
Taxpayers can optimize their tax situation, taking into account the new deductions and deadlines established by the reform. Some key recommendations include:
- Take advantage of energy efficiency deductions: Although deductions of up to 40% for works such as the installation of solar panels or the improvement of heating have already ended by 2024, you can still benefit from other current tax incentives, such as deductions for electric vehicle recharging infrastructures and other improvements related to energy sustainability.
- Donation incentives: The deduction for donations has been increased, with a 40% deduction in the tax quota if donations are made to the same entity for two consecutive years.
- Review of the limits of compensation of tax bases: If your company has suffered tax losses in previous years, it is vital to know the limits for the compensation of tax bases since the Constitutional Court has restored specific rules that had been previously eliminated.
How do we take advantage of tax reform?
The 2024 tax reform is a unique opportunity to optimize your tax situation, whether you are an individual or you manage an SME or large company. Energy efficiency deduction measures and tax flexibility for SMEs are just some of the tools available to reduce your tax burden.
Taking advantage of these opportunities can make all the difference in your tax planning. If you need help implementing these measures or have questions about how to optimize your tax burden, contact our team of experts to advise you and design the perfect strategy for you or your company.