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Below you will find the key tax reforms included in the National Budget Bill announced on 30 October.

Unless otherwise stated, these measures will enter into force from the day after the law is published in the Official State Gazette (“BOE”), i.e. after the completion of the parliamentary process that has just begun has ended.

Personal Income Tax.

The following changes will take place from 1 January 2021:

  • Earned Labour income. Taxation of employment-related income exceeding EUR 300,000 is increased by 2%, rising from 45% to 47%. However, the ultimate maximum rate will depend on each Autonomous Community. For example, in Catalonia it will be 50% and in Madrid 45.5%.
  • Savings income. Taxation of savings income exceeding EUR 200,000 euros is increased by 3%, i.e., the marginal tax rate is set at 26% (previously 23%).
  • Posted workers to Spain. Taxation is increased from 24% to 47% for incomes exceeding EUR 600,000 (i.e. 24% is applied up to EUR 600,000 and 47% to the rest). For income arising from dividends, interest or capital gains, tax is raised by 3% for income exceeding EUR 200,000.
  • Social benefits schemes (“Pension plans”). For individual coverage, conditions are worsened by limiting taxpayers’ contributions for tax purposes to EUR 2,000 (previously EUR 8,000). However, this limit will be set at EUR 8,000, provided that the increase comes from company contributions and does not exceed 30% of the sum of net income from employment and economic activities received by the individual in the tax year.
  • Objective assessment scheme. The quantitative limits in the objective assessment scheme are extended.

Wealth tax.

  • A 1% increase is applied to the highest tax band rate in those Autonomous Communities that have not approved their own rates. This means that assets exceeding EUR 10,695,996.06 will be taxed at 3.5%, either in 2021, or 2020, if the law is published before 31 December.
  • This provision shall remain in force indefinitely, eliminating the need to regulate any extensions.

Corporate Income Tax.

For fiscal years beginning after 1 January 2021 that have not concluded on the day after publication in the BOE,  we would like to draw your attention to the following measures:

  • Exemption on dividends and income from the transfer of securities representing the equity of resident and non-resident entities in Spain.
    • The exemption is reduced by 5%, bringing it to 95%.
    • Exceptionally, this exemption shall not apply to entities whose net turnover for the immediately preceding fiscal year amounts to less than EUR 40 million and meet the following requirements: i) they are not holding companies; ii) they do not belong to a group of companies; and iii) they did not previously have direct or indirect participation of 5% or more in other entities.

In addition, in order to apply this exemption, a number of other requirements must be met with respect to the investee, namely: i) 100% of the investee must have been directly owned since its incorporation; ii) the investee must have been incorporated after 1 January 2021; and iii) the income subject to the exemption must be received within the three years immediately and subsequently to the incorporation of the distributing entity.

  • The above measure is echoed in the application of other mechanisms to eliminate double taxation of dividends or shares in profit and income resulting from transfers. For example, in international economic double taxation and international tax transparency.
  • Capital or equity participation with an acquisition value exceeding EUR 20 million.
    • Deductible limit for financial expenses shall be reduced since dividends or profit-sharing of these participations cannot be included in the operating profit.
    • Exemption and elimination of international double taxation on dividends or shares in profit and income resulting from the transfer of such shares is repealed.

Nevertheless, until the last fiscal year starting in 2025, applying these tax benefits is allowed, provided that such participations exceeding EUR 20 million are acquired before 1 January 2021 and meet the remaining requirements (excluding the 5% minimum percentage of ownership).

Non-Resident Income Tax.

Exempt income:

  • Residents in States that belong to the European Economic Area (with which there is an effective exchange of information) are deemed comparable to residents in EU Member States in terms of eligibility for applying the exemption of interest, income from the transfer of equity capital to third parties, as well as real estate capital gains without a permanent establishment.
  • Exemption from profit distribution by subsidiary companies resident in Spain to their parent companies or permanent establishments of the parent company located in the European Economic Area is amended. Specifically, a mere participation exceeding EUR 20 million not amounting to a direct or indirect participation of at least 5% is no longer considered to be a parent company.

Nevertheless, until the last fiscal year commencing in 2025, this exemption is allowed for parent companies whose holdings exceeding EUR 20 million have been acquired before 1 January 2021 and meet the remaining requirements (excluding the 5% minimum percentage of ownership).

Value Added Tax.

  • VAT is raised from 10% to 21% on alcoholic drinks and so-called “sweetened drinks“, i.e. drinks containing added natural and derived sweeteners and/or sweetening additives, except for baby milk and drinks considered as food supplements for special dietary needs.
  • This includes a new category of services supplied in the territory of application of VAT for non-exempt hospital or health care services, where their effective use or operation takes place in that  territory.

Other tax measures.

  • Tax on Property Transfers and Stamp Duties. There is a 2% increase in tax rate for transfers and rehabilitation of titles of nobility and grandeeships.
  • Tax on Insurance Premiums. The tax rate is raised from 6% to 8%.
  • Interest. Delay interest for 2021 will be 3.75%, while the statutory interest is set at 3%.
  • Charges. Among other developments:
    •  The fixed amount rates for the State Treasury are increased by 1%, with the exception of those introduced or updated since 1 January 2019.
    • Rates on gambling remain the same.
  • Donations. 
    •  Deduction for donations on Personal Income Tax, Corporate Income Tax and Non-Resident Income Tax. The percentages and limits for the deduction are increased by 5% when donations have been made to the priority donation activities.

On the other hand, the Spanish Government has announced that the Draft Law on Measures to Prevent and Combat Tax Fraud adopted by the Council of Ministers has been presented to the Parliament for its approval.

If passed before 31 December 2020, the new measures could come to affect Personal Income Tax and Wealth Tax for this financial year 2020, although it is unlikely that these measures will be passed in time.

Valuation of unit-linked insurance and temporary or life annuities in Wealth Tax.

  • Valuation of unit-linked insurance. As in the past, these will be calculated at the surrender value when the tax is accrued. The new feature is that, if the policyholder does not have the power to exercise the full surrender right on the date on which the tax accrues, the insurance will be calculated at the value of the mathematical provision on that date on the policyholder’s taxable income.
  • Exception. In case the holder of the economic rights is a person other than the policyholder, the insurance will be calculated on the taxable income of the beneficiary or holder of the economic rights. It will therefore no longer be possible to argue that if the policy has no surrender value on 31 December it should not be included in the tax base.
  • New valuation rule for temporary or life annuities. When these are received from a life insurance policy, they must be calculated at their surrender value at the moment the tax accrues.

Valuation of real estate in Wealth, Inheritance and Gift Tax.

  • To provide legal certainty to taxpayers and tax administrations, the market value of the real estate will be presumed to be the market reference value of the General Directorate of the Land Registry, provided that it is published as such on the date of accrual on its website.
  • In the event that the reference value has not been published, the market value of the property may be demonstrated by any means of evidence admissible in law. 
  • This will mean that the value to be included in this tax base will be increased in several cases because the reference value will be higher than the land registry value.

Agreements as to succession.

  • Acquisitions made during the life of the deceased as a result of contracts and agreements as to succession between the same persons are included in the sum of donations and contracts and agreements as to succession.
  • In order to prevent values and dates of acquisition of the acquired item from being updated (which would result in lower taxation, when the beneficiary transfers them, than if the item had been transferred directly to a third party by the original holder), it is provided that:

“(…) in acquisitions for gain on death arising from contracts or agreements as to succession, with effects on the present, the beneficiary of these who transferred the acquired goods before the death of the deceased will be substituted for the position of the latter, with respect to the value and date of acquisition of these, when this value is lower than that foreseen in the preceding paragraph.”.

Extension of Inheritance and Gift Tax Benefits established by regional regulations to non-resident taxpayers.

  • Non Spanish resident taxpayers (both EU and non-EU citizens) receiving assets located in Spain by way of inheritance or donation will be eligible to apply the same benefits or tax reductions that the Region where those are located established for Spanish resident taxpayers.
  • This is aligned with a recent sentence of the Supreme Court that allows non Spanish resident taxpayers affected by this former discrimination to apply for the refund of taxes paid in excess in the past.
  • Applicable even to those excess paid more than 4 years ago.


  • Obligation to disclose virtual currencies. In addition to new obligations to disclose information for those who provide related services in Spain, this obligation is introduced for those who held virtual currencies abroad, as well as for those who have the status of beneficiary or authorized party or otherwise hold power of disposal.
  • Obligation to be fulfilled by form 720.


  • No deferral. Taxation of capital gains arising from the transfer of units or shares in listed investment funds and listed SICAVs (ETFs) cannot be deferred.
  • General application. This rule shall apply regardless of the regulated market or multilateral trading system on which they are listed and the index composition that they reproduce, replicate or take as a reference.

Other measures.

  • Limiting cash payments to EUR 1,000 for transactions involving a businessperson or professional.
  • Updating the list of tax heavens and extending the concept to include “non-cooperative jurisdictions“, or banning tax amnesties.
  • Transposition of the European Anti-Tax Evasion Directive (ATAD) is envisaged, introducing the areas of the directive concerning International Tax Transparency (ITT) and exit taxation or “Exit Tax” into the Spanish Legislation.
  • The prohibition of the so-called “dual-use of software” is also established.

Bruno Dominguez is the managing partner of Baker McKenzie's Barcelona office, head of the Tax practice in Barcelona and Chair of our Wealth Management Practice in EMEA region. Bruno has been coordinator of the Master of Laws in Taxation at the University of Barcelona, and associate professor at ESADE Business School. He has written several articles and regularly speaks at conferences and seminars on business restructuring, transfer pricing, wealth management and taxation of family businesses.


Isabel de Otaola has been a partner at Baker McKenzie’s Madrid office since 1999. She is a member of the Firm’s European Tax Practice Group. She is also active in the Tax Planning and Employee Benefits subgroups, as well as in the Global Reorganizations Practice Group. She regularly lectures in various conferences and seminars, and has authored several publications and articles, particularly for BNA’s Tax Management International Forum. Ms. de Otaola is also a certified public accountant from the Instituto Censores Jurados de Cuentas, and is a member of the Madrid Bar Association.


Davinia Rogel has 8 years of extensive experience in tax planning and consultancy, as well as representing clients faced with tax audits and court procedures in Spain. She specializes in tax issues affecting multinational groups and restructuring companies. She has extensive experience in the tax field of wealth management assisting clients in planning and protecting their futures. She works closely with investment advisors, accountants, pension consultants, life underwriters and banking representatives to develop comprehensive wealth plans. She is the author of several articles and a regular speaker at conferences and seminars on wealth management and business restructurings. She is also a regular contributor to Baker McKenzie publications: Apuntes de Actualidad, Private Banking Newsletter, European Tax Newsletter, Aranzadi, etc.


Rodrigo Ogea is the managing partner of the Madrid office since October 2017. He joined the Firm in 2003 and became a partner in 2005. He heads the Tax Practice Group in Madrid since 2008. He also serves in the Steering Committee of the European Tax Planning and Transactions Group. Recognised as one of the most prestigious tax lawyers by Chambers, he is a trustee of the Foundation for Taxes and Competitiveness, member of the tax committees of CEOE (Spanish Trade Board), Círculo de Empresarios, the International Chamber of Commerce (ICC), the US Chamber of Commerce in Spain and the American Business Council. He has also been the Spanish representative to the European Commission Expert Group for the Removal of Tax Obstacles for cross-border European Private Equity Investments.