They will pay more tax for personal income tax, self-employed and corporate income tax.

The year 2024 kicks off with new developments in taxation that affect everyone, whether they are individuals, self-employed or companies; if they belong to the almost extinct middle class or if they are merely self-employed, they will pay more and large companies will also pay more. In other words, everyone will pay more tax in Spain.

• Payroll tax.
• The self-employed and the Renta.
• Modules system.
• Deduction for rent.
• Tax on the rich in the Basque Country.
• Return of Patrimonio in two Autonomous Regions.

The changes range from the rise in personal income tax on everyone’s payroll, the return of Wealth Tax to Madrid and Andalusia, the loss of the temporary nature of the solidarity tax (no longer temporary) on large fortunes, the lower general deduction for renting a home or the greater tax burden for the self-employed. These are the main changes.

Taxpayers in Madrid and Andalusia will have to pay the Wealth Tax (levied on fortunes of over two million euros) from 2024 onwards, after the regional governments reactivated it with the aim of both regions keeping the revenue instead of it going to the central government through the tax on large fortunes.

Although Madrid announced that it will establish bonuses in other taxes to compensate for this reinstatement of the IP, I have not yet seen anything about it.

Intergenerational Equity Mechanism (MEI) or Payroll Tax, according to some.

In application of the 2022 pension reform (D.F. 4ª of Law 21/2021, of 28 December), from 2023, the so-called “Intergenerational Equity Mechanism” will be created, consisting of a finalist contribution applicable to all schemes and in all cases in which contributions are made for the contingency of retirement. The concept of this “payroll tax” is really an additional contribution that will feed the Social Security Reserve Fund to finance the pension “piggy bank”.

In its first year, this payroll tax was set at 0.6%, with the company bearing 0.5% and the worker 0.1%. For the year 2024, the rate increases to 0.7%, distributed between the company (0.58%) and the worker (0.12%). This tax is calculated on the contribution base, which is the gross monthly remuneration, including pro-rata extra payments. For example, an employee with a net salary of 1,200 euros per month would have a gross base of approximately 1,900 euros per month. Applying 0.7%, this equates to about 13 euros, of which the employer will contribute about 11 euros and the employee about 2.2 euros. The tax rate will increase by one basis point each year (0.8% in 2025, 0.9% in 2026, 1% in 2027…) until it reaches 1.2% in 2029. This system will apply until 2032, when the government will carry out a review.

The self-employed and the Renta

From 2024, it is established that all individuals who, at any time during the tax period, have been registered in the Special Regime for Self-Employed or Self-Employed Workers (RETA) or in the Special Social Security Regime for Sea Workers, will be obliged to file an income tax return, regardless of the amount of income obtained. Previously, this obligation only applied to those self-employed workers whose net income from economic activities exceeded 1,000 euros per year or who generated property income in excess of 1,000 euros per year.

Modules system

For next year, the Ministry of Finance has eliminated the extraordinary 10% reduction in Personal Income Tax (IRPF) for the self-employed who are taxed under the objective estimation system, also known as the module system. This decision means that around 430,000 self-employed professionals across the country will have to pay approximately 120 million euros more compared to 2023. In average terms, this translates into an increase of around 280 euros per year per self-employed person.

The Administration will only allow an overall reduction of 5% in 2024, reverting to the same reduction that existed before the outbreak of the coronavirus pandemic. It should be recalled that this reduction was 15% in 2022 and 10% in 2023, implemented in order to mitigate the negative effects of Covid-19, inflation and the situation in Ukraine.

The special reductions that were approved in 2022 for agricultural and livestock activities, which include a 35% discount on the cost of agricultural diesel and 15% on the cost of fertilisers needed to carry out these tasks, will be retained. In addition, the 20% reduction for economic activities carried out in La Palma due to volcanic activity will be maintained, as well as the 20% reduction for activities carried out in Lorca (Murcia) as a consequence of the earthquake that occurred in 2011.

Deduction for renting

The Law for the Right to Housing, passed in May 2023, established that from 1 January 2024 new tax incentives for renting property for residential use (excluding tourist accommodation) will come into force. In this regard, the deduction in Personal Income Tax (IRPF) is reduced from 60% to 50% of net income. This means that owners will be able to deduct up to 50% of the difference between the income and the expenses associated with the rental in their income tax return.

It is important to note that the 50% deduction applies to rental contracts signed after 1 January, while those signed until 31 December 2023 will maintain the 60% deduction.

Additionally, those owners who have a rented property in an area classified as stressed and reduce the rental price by 5% compared to the last rent will be able to benefit from a personal income tax deduction of up to 90%. A 70% rebate will be granted to owners renting for the first time, as long as the property is located in a stressed area and the tenant is between 18 and 35 years of age.

Likewise, the 70% rebate will be applied when the tenant is the Public Administration, a non-profit organisation, or when the property is subject to a public housing programme or qualification that imposes a limitation on the rental income. A deduction of 60% will also be allowed when the property has been renovated two years prior to the conclusion of the rental contract.

Tax on the rich in the Basque Country

The Basque Country will apply for the first time in 2024 the tax on the Very Large Fortunes. This tax came into force on 29 December 2022 for the whole of Spain, except for the Basque Country and Navarre (the latter did approve it for 2023), the Autonomous Regions to which the Government ceded the regulation, management and collection of the tax. Between October and December this year, Guipúzcoa, Álava and Vizcaya have approved the tax so that taxpayers will have to pay it by 2024. As a novelty, Álava and Vizcaya have set the highest rate (3.5%) for fortunes exceeding 14.5 million, while in the rest of Spain the 3.5% rate is applied from 16 million in assets.

Return of Patrimonio in two Autonomous Regions

From 2024, residents in Madrid and Andalusia will be obliged to pay Wealth Tax, which is levied on fortunes exceeding two million euros. This measure is implemented following the reactivation of the tax by the regional governments, with the aim of both regions retaining the revenue instead of it flowing to the central government through the tax on large fortunes.

Although Madrid has announced the implementation of bonuses in other taxes to compensate for the reinstatement of the Wealth Tax, no details or information have been published so far.

And the “Temporary” Solidarity Tax on Major Fortunes remains permanent. As I said.

The novelties introduced refer to the minimum exemption, the form of filing the tax return and its validity.

The following changes have been introduced:

a) With effect from 29-12-2022, the minimum exemption of 700,000 euros is extended to all taxpayers, regardless of whether or not they are resident in Spain.

b) The application of the tax is extended until the review of the taxation of assets in the context of the reform of the regional funding system is carried out.

c) From 29-12-2023, the obligation to declare the tax by electronic means is legally provided for.