Regulatory developments 2021

Main tax changes introduced by Act 11/2020, on General State Budgets for 2021 (Official State Gazette of 31 December)

PERSONAL INCOME TAX (IRPF)

General scale of Personal Income Tax

Effective as from 1 January 2021, the scale applied to the part of the general net asset base is modified to determine the total state payment, adding a new tranche to the part of the net tax base that exceeds 300,000 euros, to which a rate of 24.50% will be applied.

The new general scale applicable is as follows:

(Article 63,1 of the Personal Income Tax Act is amended by Article 58 of the LPGE for 2021).

Tax rates of saving on personal income tax

Effective as from 1 January 2021, the scale applied to the part of the savings tax base is modified to determine the total state payment by adding a new tranche to the part of the net savings base that exceeds 200,000 euros, to which a rate of 13.00% will be applied.

The new scale applicable to the net savings base is as follows:

Likewise, the scale applicable to the net savings base for determining the total autonomous community payment is also modified under the same terms as those indicated.

The scale applicable in this case will be the same as the previous one.

Meanwhile, the scale applied to the part of the net savings base is modified to determine the total state payment in the case of taxpayers who have their usual residence abroad for any of the circumstances indicated in Articles 8,2 and 10,1 of the Personal Income Tax Act. In this case, a new tranche will be added to the part of the net savings base that exceeds 200,000 euros, to which a rate of 26.00% will be applied

Thus, in this case, the scale applicable to the net savings base will be as follows:

(Articles 66 and 76 of the Personal Income Tax Act are modified by article 59 of the LPGE for 2021).

Scale of withholdings and payments on account applicable to recipients of income from work

Effective as from 1 January 2021, the scale applicable to determine the percentage of withholding to be applied on earned income derived from employment or statutory and pension and liability relationships is modified. A new tranche is added to the base part to calculate the withholding rate that exceeds 300,000 euros, to which a withholding rate of 47.00% will be applied.

The scale for applying the withholding rate will therefore be as follows:

(Article 101,1 of the Personal Income Tax Act is amended by Article 60 of the LPGE for 2021).

Scales applicable to workers posted to Spanish territory

In the special tax regime provided for in Article 93 of the Personal Income Tax Act for workers posted to Spanish territory, effective as from 1 January 2021, the applicable rates are modified to determine the full payment. Two cases are distinguished:

First, to the net asset base, except for the portion corresponding to dividends, interest or other income obtained by the transfer the following scale applies to third parties of own capital and capital gains that are disclosed as a result of the transfer of capital assets:

(Previously, the percentage applicable to the net tax base from 600,000 euros was 45%).

Second, the following scale applies to the part of the net asset that corresponds to dividends, interest or other income obtained by the transfer to third parties of own capital and capital gains that are made manifest when transferring equity elements:

(A new tranche is created for the net tax base from 200,000 euros to which a rate of 26% will be applied).

Similarly, the percentage of withholding or payment on account on earned income has been modified in this special scheme, with effect from 1 January 2021. Specifically, when the remuneration paid by the same employee of earned income during the calendar year exceeds 600,000 euros, the withholding percentage applicable to the excess will be 47% (previously it was 45%).

(Article 93 of the Personal Income Tax Act is amended by Article 61 of the LPGE for 2021).

Limits of reduction in the gross tax base of contributions to social security systems

With effect from 1 January 2021, different limits are modified in relation to social welfare systems.

Private insurance that exclusively covers the risk of severe or high dependency:

The total of the reductions made by all the people who pay premiums in favour of the same taxpayer, including those of the taxpayer themselves, cannot exceed 2,000 euros per year (previously the limit was 8,000 euros per year).

Contributions to social welfare systems for which the taxpayer's spouse is a participant, mutual society member or holder:

The taxpayer whose spouse does not obtain net income from work or economic activities, or obtains them in amounts less than 8,000 euros a year, may reduce the contributions made to the social security systems of which the taxpayer is a participant, mutual society member or holder.

These contributions will have a maximum limit of 1,000 euros per year (previously the limit was 2,500 euros).

Maximum limit set:

As a joint maximum limit for contributions to social security systems, the lesser of the following amounts will be applied:

1. 30% of the sum of net earnings from work and economic activities received individually during the fiscal year.

2. 2,000 Euros per year (previously the limit was 8,000 euros)

   From 1 January 2021, this limit will be increased by 8,000 euros, provided that this increase comes from business contributions.

   The contributions made by the individual employer to employment pension plans or social welfare mutual societies, of which be promoter and participant or mutual society member, as well as those that make plans for corporate social security or group dependency insurance plans for which in turn, the policyholder and the insured party will be considered as business contributions for the purposes of calculating this limit.

   In addition, the annual limit of 5,000 euros is maintained for the premiums to group dependency insurance policies paid by the company, which already existed previously.

(Articles 51,5 and 7 and 52 of the Personal Income Tax Act are modified by article 62 of the LPGE for 2021).

Extension of the exclusive limits of the objective estimation method

The quantitative limits that have been applied in previous years and which delimit the scope of application of the method are extended for 2021 objective estimation for economic activities included in the scope of application of this method, except for agricultural, livestock and forestry activities, which have their own quantitative limit by volume of income.

Therefore, the general excluding figures will be as follows for 2021: 

• Volume of revenue in the previous year exceeding 250,000 euros for all economic activities, except agricultural, livestock and forestry activities. All the operations shall be taken into account, irrespective of whether there is a duty to issue an invoice. Transactions in which there is an obligation to issue an invoice when the recipient is a business owner may not exceed 125,000 euros.

• Turnover for the set of agricultural, forestry and livestock activities exceeding 250,000 euros.

• Volume of purchases in goods and services in the previous year, excluding acquisitions of fixed assets, exceeding 250,000 euros. 

(The Transitional Provision of the LIRPF is modified by article 63 of the LPGE for 2021).