Tax hikes and other measures to cut Spain's public deficit

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1. It changes the Corporate Income Taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.. It temporarily limits (2012 and 2013) the deduction for goodwill and other deductions, sets a minimum installment payment for large companies, and indefinitely limits the deduction of financial expenses between companies in the same group. It also makes the exemption for selling foreign shareholdings more flexible and eliminates accelerated depreciation.
2. It adapts Personal Income Tax to the corporate tax changes on accelerated depreciation, and sets how the later sale of an asset that got that benefit is taxed.
3. It reforms the tobacco tax. It treats smoking tobacco like rolling tobacco and, for cigarettes, raises the weight of the flat per-unit tax (19 euros per 1,000 cigarettes) while cutting the percentage-based part from 58% to 55%.
4. For the tax on the increase in value of urban land, the reduction of the taxable base after a cadastral update becomes optional for city councils, with a maximum of 60% during the first five years.
5. It reorganizes the management of public real estate: it strengthens coordination by the Ministry of Finance through a specific commission and abolishes the Coordinating Board for Administrative Buildings.
6. It lets taxpayers declare undeclared assets by paying 10% of their value, with no fines, interest or surcharges, until November 30, 2012, and avoids criminal liability if done before an inspection starts. It also adjusts the ICO's risk weighting and allows payment of expired tax debts to shield the payer from criminal liability.

Who it affects

• Large companies (revenue of at least 20 million euros): They pay more: limits on deductions and a minimum installment payment of 8% of profits in 2012 and 2013.
• Companies financed by entities in their own group: They cannot deduct financial expenses on debts with their group unless there are valid economic reasons, and deductions are capped at 30% of operating profit.
• Taxpayers with undeclared money or assets: They can declare undeclared assets by paying 10% of their value with no fines, until November 30, 2012.
• City councils: They may choose whether to apply the reduction of the taxable base after a cadastral update, which gives them more revenue.
• Tobacco manufacturers and sellers: Tax rates change: cigarettes get a higher flat component and rolling tobacco is taxed uniformly.

Words worth knowing

Fondo de comercio (goodwill)

The amount a company pays for another above the value of its assets, for things like its brand or customer base.

Libertad de amortización (accelerated depreciation)

A tax benefit that allowed deducting the cost of new investments all at once instead of gradually.

Pago fraccionado (installment payment)

An advance payment of the year's tax that companies make in several installments during the year.

Base imponible (taxable base)

The amount of money on which the tax is calculated.

Prescripción (statute of limitations)

The loss of the Tax Agency's right to collect a debt after too much time has passed.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries