The Spanish government has announced proposed tax reforms aimed at boosting economic growth by reducing taxes. Following a period of public consultation these
proposals come before the Spanish parliament this month (October 2014), with the final agreed measures entering into force on 1 January 2015.
The government’s proposals would see income tax rates reduced with a 45% top rate. However, the income threshold to reach the new marginal maximum would be reduced significantly from €175,000 to €60,000.
The savings income tax rate would be reduced from 27% to 24% in 2015 and then to 23% in 2016. The savings income threshold would be increased from €24,000 to €60,000.
Wealth tax and inheritance tax are not included in the proposed reforms.
A new exit tax is also proposed which, if approved, would mean that from 1 January 2015 Spanish residents moving their tax residence outside the EU or EEA would be subject to a capital gains tax on any unrealised gains in their investment holdings.
This new exit tax would apply to individuals who have been tax resident in Spain for at least five of the last ten years and who own more than €4m in ‘relevant assets’ or who own more than 25% of a company worth over €1m. ‘Relevant assets’ would comprise investment funds and listed or unlisted shares, but not other assets such as bonds, real estate or life insurance.
These measures increase the attractiveness and tax-efficiency of wrapping investment funds within an EU cross-border life insurance policy while resident in Spain.