Effects of the next fiscal Reform in Spain

On 20 June 2014, the Council of Ministers passed the Preliminary Law on fiscal reform aimed to improve business competition and which will affect both self-employed workers and businesses.

Tax on companies (TC)

With the objective of bringing the effective tax rates closer to the nominal rate, the general tax rate is lowered from 30% to 28% in 2015 and to 25% in 2016 (the current tax rate of small and medium businesses) with the resulting profit for businesses. On the other hand, the number of deductions is reduced, apart from those of I +D + i.

New measures are also incorporated that will permit small and medium businesses to create:

  • A levelling reserve, or reserve for future losses, on the five following tax periods, with a limit of one million euros and a 10% deduction of the taxable base. The tax on small and medium businesses that makes up this reserve will be 22,5% instead of 25%.
  • A reserve of capitalisation that consists of affecting up to 10% of the profits of a business capital to reduce the financial leverage and improve their capacity for autofinancing. In this case, a deduction of 10% of the taxable base will also be applied.

The tax rate of small and medium businesses that constitute both reserves will be reduced to 20,25%. The objective of this measure is not so much the fiscal advantage but encouraging a business’s healthy management of financial resources.

Newly created companies will continue paying taxes of 15% on the first 300,000 euros and 20% on the remaining taxable base for the first year. This measure is extended to the second year.

Tax on the Income of Individuals (TII)

The taxing on freelancers goes down from 21% to 19%. Incomes less than 12.000 will be taxed at a rate of 15% from the month of July 2014.

Additionally, the reduction of 5% for expenditures that are difficult to substantiate is substituted for a maximum limit of 2.000 euros. Although the lowering of the tax rates favors freelancers, the effects of the modification of the deduction of expenditures that are difficult to substantiate will depend on the level of income of the freelancer.


It is worth pointing out that the units of the sectors that sell directly to the public (hotels and restaurateurs, farmers and cattle breeders, etc.) are limited.

Moreover, the law modifies the principle of territoriality of the VAT in regard to e-commerce (electronic services, telecommunications and radio-television). The tax will be based on where the customer is located and not where the borrowing business is established.

Finally we wish to underline that the Tax Agency will create and publish a list of delinquents with debts greater than one million euros.

This article is not considered as legal advice

Mariscal & Abogados' services in the tax field include, among others, advice on Spanish local taxes, international taxes and transfer pricing. If you have a query, do not hesitate to Contact us.