Spain To Slash Income Tax Rates
The Spanish Cabinet on June 20, 2014, approved reductions to corporate and individual income tax rates to boost investment and employment.
Under the changes, the corporate tax rate will fall from 30 percent to 28 percent in 2015, and to 25 percent in 2016.
The individual income tax rate for income up to EUR12,450 (USD16,950) will be cut to 20 percent from 2015, and to 19 percent from 2016. This compares favorably with the current rate of 24.75 percent, which applies to income up to EUR17,707. The number of tax brackets will fall from seven to five, with the bottom and top rates of 24.75 percent and 52 percent falling to 20 percent and 47 percent in 2015, and to 19 percent and 45 percent in 2016. The top rate of income tax will cut in at the substantially lower income level of EUR60,000, compared with EUR300,000 currently.
Budget Minister Cristóbal Montoro said that the income tax rate cuts will result in an average cut to Spanish taxpayers’ income tax liability by 12.5 percent, although lower earners will get the lion’s share of the benefit.
The reforms are in line with recommendations from the European Commission and the International Monetary Fund that the country should begin to lower corporate and personal income tax rates. The Spanish government has, however, rejected recommendations from both bodies that it increase its headline value-added tax (VAT) rate.