Spain enters 2025 with significant new tax law

The Law 7/2024, which was published in the Official State Gazette on 21 December 2024 and came into effect the following day, introduces significant tax measures in Spain. Additionally, other tax measures are introduced by Royal Decree-Law 9/2024, published a few days later but not yet ratified.

Corporate Income Tax

Restrictions for large companies

From 1 January 2024, large companies face limits on offsetting their tax losses. Companies with a net turnover of less than or equal to €20 million face a limit of 70%; while companies with a net turnover between €20 million and €60 million face a limit of 50%. Companies with a net turnover of more than €60 million, with limit of 25%.

Additionally, specific limitation on the application of deductions for double taxation have been reintroduced. Starting from 1 January 2024, the amount of deductions for double taxation for taxpayers with a net turnover of more than €20 million cannot exceed 50% of the taxpayer's total tax liability.

Extension of limit on offsetting individual tax losses in tax groups

The previously established limitation on taxable income for tax groups was initiated in 2023 and has now been extended to apply to 2024 and 2025. Under this limitation, the taxable income of tax groups is determined by adding 100% of the positive tax bases but only 50% of the individual tax losses of each entity in the tax group. Any resulting adjustments must be reversed and spread evenly across the 10 fiscal years following their application through negative tax adjustments.

Capitalisation reserve

Starting from 1 January 2025, the general reduction percentage is increased to 20% of the rise in own funds (25% for companies with a net turnover of less than €1 million) and up to 30% if specific criteria related to the increase in the average headcount for the year are met.

Reduction in tax rates

Effective from 1 January 2025, tax rates for micro-enterprises and small entities have been gradually lowered.

Entities with a net turnover of less than €1 million, for the tax base to €50,000, will see a reduction of 21% for the 2025 fiscal year, 19% for the 2026 fiscal year, and 17% for the 2027 fiscal year and onwards. For the excess over €50,000, the reduction will be 22% for the 2025 fiscal year, 21% for the 2026 fiscal year, and 20% for the 2027 fiscal year and onwards.

Entities with a net turnover of less than €10 million will have a reduced rate of 24% in 2025, gradually reduced to 20% from 2029 onwards.

Complementary Tax

A new Complementary Tax has been introduced to ensure that large groups with consolidated revenues exceeding €750 million maintain a minimum global effective tax rate of 15% wherever they operate. In general, this tax started taking effect on 1 January 2024, with specific rules for deferred application.

The Complementary Tax that guarantees an overall minimum level of taxation for multinational groups and large domestic groups.

Personal Income Tax

• Increase in marginal rates of the savings tax base

  Effective 1 January 2025, the tax rate on income exceeding €300,000 has been increased from 28% to 30%. This amendment also applies to taxpayers benefiting from the special scheme for workers posted to Spanish territory.

• Extension of the second payer limit

  From 2025, the limit for declaring income with two or more payers is raised from €1,500 to €2,500.

• Extension of certain deductions

  Deductions for energy efficiency improvement in homes, the purchase of plug-in electric vehicles, and the installation of charging stations are extended for another year, until 31 December 2025.

VAT rate

Starting 1 January 2025, the Value-Added Tax (VAT) rate for select essential food items reverts to 4%. This VAT rate includes bread, flour, milk, cheese, eggs, fruits, vegetables, legumes and cereals. Notably, olive oil is also included among these products, benefitting from the super-reduced VAT rate of 4%.