Spain: What to know about the Spanish tax changes

Spain: What to know about the Spanish tax changes

Barcelona: The Spanish government has imposed new measures to tackle the tax gap and the growing problem of over-taxation, in a bid to tackle an economic crisis that has hit Spain and its eurozone partners hard.

Under the measures, which come into force from 1 January, Spaniards will pay tax on earnings over €300,000 (£230,000) in a single tax year and tax-free on earnings above €2 million.

The measure also allows families to transfer income to their children for tax purposes.

The measures, dubbed the ‘tax holidays’ by the government, are designed to curb tax evasion, and in particular, the evasion of low-income earners.

The government also introduced a new tax-collection mechanism called the ‘soup box’ which will allow households to collect tax from businesses in excess of €500.

The new measures are expected to raise around €1.5bn over the next three years, according to the government.

The economy has been hit hard by the recession, and the tax holiday is likely to increase the deficit in the coming years, making the country one of the worst in Europe.

However, some economists have warned the measures are unlikely to have a long-term impact on the Spanish economy. 

The Spanish economy is expected to shrink by 1.2 per cent this year, according the IMF.

Spain’s economy shrank by 3.5 per cent in the fourth quarter of this year and by 5.7 per cent last year.

The Spanish government’s plans will come into effect on 1 January.

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