Tax, social and administrative measures for 1998

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1. Raises the limits for deducting pension plan contributions from personal income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.: 20 percent of income, capped at 1,100,000 pesetas a year. If the limit is exceeded, the excess can be deducted over the following five years.
2. Reforms the rules for calculating income of self-employed people and small businesses: it removes the coefficient regime, creates a simplified direct estimate for businesses with turnover under 100 million pesetas, and allows a 15 percent reduction of net income under objective estimate during 1998.
3. For the Wealth Tax, it exempts property owned jointly by both spouses that is used in the business activity of either of them, as long as the requirements applying to the business owner are met.
4. For Corporate Income Tax, it sets a 30 percent rate on taxable income up to 15,000,000 pesetas and allows faster depreciation of new fixed assets. It also creates a deduction of 800,000 pesetas for each additional disabled worker hired on a permanent contract.
5. Creates the Electricity Tax, at a rate of 4.864 percent, to offset the removal of the coal mining surcharge from electricity bills.
6. In Social Security, it aligns payment deadlines for contribution debts with those of the State, sets a five-year limitation period for recovering benefits paid by mistake, and expands the cases in which an orphan's pension can be received when the child works and earns less than 75 percent of the minimum wage.
7. Improves aid for victims of terrorism: it compensates damage to homes and vehicles, can pay for temporary housing for people who must leave their home after an attack, and allows advances of up to 3,000,000 pesetas of the final aid in cases of serious mutilation.
8. Creates three autonomous agencies: the Institute for the Restructuring of Coal Mining, the State Security Infrastructure Management Office, and the Spanish Medicines Agency, which takes over the medicines powers of the Ministry of Health and Consumer Affairs.

Who it affects

• People contributing to pension plans: They can deduct more from income tax and recover the excess over the following five years.
• Self-employed people and small and medium businesses: The rules for calculating income under personal income tax, VAT and Corporate Income Tax change, with new simplified options and deductions.
• Social Security workers and pensioners: Payment deadlines for contributions, resumption of unemployment benefits, and rules on orphan's, widow's and temporary disability benefits change.
• Victims of terrorism and their families: Aid for damages, temporary housing and cash advances is expanded.
• Electricity companies and electricity consumers: A new 4.864 percent tax on electricity is created.

Words worth knowing

Estimación directa simplificada

A simplified way of calculating business income under personal income tax, for activities with low turnover.

Estimación objetiva

A system in which the Tax Agency calculates business income using fixed modules, instead of actual income and expenses.

Devengo

The moment the obligation to pay a tax arises, even if payment happens later.

Prorrata

A percentage used under VAT to work out how much of the tax paid can be deducted when some operations allow deduction and others do not.

Compensación a tanto alzado

A fixed amount paid to farmers and ranchers instead of letting them deduct the VAT they paid.

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