THE GOVERNMENT ADVANCES THE TAX REDUCTION PLANNED FOR 2016 TO 2015

Last Friday 10th July, the Government approved Royal Decree-Law 9/2015, of July 10 with the aim of reducing the tax burden on the taxpayers for Personal Income Tax (PIT). The Government regulates by this Royal Decree-Law a reduction in PIT rates applicable as of July. This means that in 2015, an intermediate tax rate is going to be applicable both in the general and the savings tax base. The intermediate tax rate will be between the one which was in force until July and the one that will definitively enter into force in 2016.
This way, the Government intends that taxpayers increase their liquidity in a favorable economic context that has allowed it to implement this rebate in the middle of 2015. The reduction is applicable from this July, although companies may adapt to it during July and August.
Lower tax rates are set for employees, applicable throughout the whole year 2015. This implies that, as companies must regularize the amounts already withheld until July, the amount to be received in the following months will be even higher than the ones corresponding to the new rates. The lowest tax rate stands at 19.5% compared to 20% effective so far, and the maximum at 46% compared to 47% in force until June.

The Government aims with this reform that taxpayers increase their liquidity in a favorable economic context

Regarding professionals, the Royal Decree-Law establishes a withholding tax rate of 15% regardless of their income level. This reduced rate was reserved for professionals who earned less than 15,000 euros, but this requirement has been removed. In addition, a withholding tax rate of 7% is established for professionals who are in their first three years of activity, two points lower than the one existing so far (9%).
With respect to savings income, a reduction in tax rates has also been established, with tax rates ranging from 19.5% to 23.5%. The fact of introducing this reduction in July with effect for the whole year 2015 advances to 2015 the tax reductions planned for 2016. The withholding tax rate is fixed at 19.5% compared to 20% in force previously.
Such withholding tax rate of 19.5% is also applicable to income subject to Corporate Tax and Non-residents Income Tax.
Finally, the Royal Decree-Law establishes new exemptions in PIT such as certain social benefits, grants and assistance to victims of violent crimes and against sexual freedom and, in particular, victims of domestic violence, and aid granted to adapt TV antennas to TDT.