MODIFICATIONS OF PERSONAL INCOME TAX IN 2023

 

As the year 2023 is about to close and in order to think about the tax declaration that we will have to deliver to the Spanish Inland Revenue between April and June 2024, it is worth taking into account some new features introduced in the Spanish tax regulation since January 2023.

Probably one of the most striking ones is the reduction for freelancers (businessmen or professionals) who determine their net income tax return by the direct estimation method.

Indeed, the Law No. 31/2022, of December 23rd of 2022, establishes that those freelancers who have obtained net returns of less than €19,747.50 from their economic activity within 2023, may reduce these returns by the following amounts:

• Freelancers with a net income from economic activities not exceeding €14,047.50 (inclusive) might apply an annual reduction of €6,498.
• Freelancers with a net income from economic activities between €14,047.50 and €19,747.50 might apply an annual reduction of €6,498 less the result of multiplying by 1,14 the difference between the net income obtained and €14,047.50 (for instance: if the net income obtained were €18,000 the applicable reduction would be €6,498-(1,14 x €3.952,5)= €1.992,15

Anyway, this reduction is only applicable as long as the freelancer has not obtained other income (different from that of economic activities). (1)

This reform levels the tax treatment of income obtained by a self-employed with labour income (which has traditionally obtained a more favorable treatment).

(1) With the exeption of exempt income

CHANGES IN INCOME TAX REGULATION REGARDING ARTIST’S WITHHOLDINGS

Withholding rates applicable to artists have been reduced by the Royal Decree No. 31/2003, published on January 24th 2023. This Royal Decree has modified the administrative regulations applicable to artist’s Income Tax withholdings by means of modifying the Royal Decree No. 439/2007, of March 2007.

The referred Royal Decree No. 31/2003 reducts the minimum 15% withholding rate, applicable since 2007 to artists dedicated to performing, audiovisual, musical arts (including technical or auxiliary activities which are necessary to carry out those activities):

 

1. into 2%, provided that those artists have been engaged by a labour contract ¹ and
2. into 7% when those artists carry out an economic activity as freelancers (activities included in groups 851, 852, 853, 861,862, 864 and 869 of second section and groups 01, 02, 03 and 05 of third section).

 

In order to be entitled to such reduction, the taxpayer must fulfill the following three requirements:

 

1. The artist must have obtained an income of less than 15.000€ for their artistical activity in the previous tax period.
2. Their artistical activity must represent more than 75% of the total sum of their full income.
3. The artist must communicate these circumstances to the payer of the returns subjected to withholding.

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¹  Special employment relationship

 

HOW TO PAY YOUR TAX RETURN IN SIX INSTALMENTS

 

The impact of temporary lay-offs caused by the alarm status has forced the Spanish tax authorities to launch the possibility of splitting the tax payment into six instalments (in those cases in which the result of the tax return is positive due to the lay-off).

This option is incompatible with the traditional one of paying into two instalments (the first one on June 30^th and the second one on November 11^th)

Payments will be made on the 20^th of each month, starting from July 20^th. There will be no interest on arrears and no need of providing a caution.

STEPS TO BE FOLLOWED TO CHOOSE THIS OPTION

1. To use this option, submit your return first: Clic onto “PRESENTAR DECLARACIÓN”.

2. Clic onto “NO FRACCIONADO” (fractionated payment only refers to the traditional possibility of dividing the payment into two instalments).

3. Clic onto “OTRAS MODALIDADES DE PAGO” (=other payment methods).

4. A confirmation message will appear, in which you can choose different possibilities from a drop-down menu. Clic onto “RECONOCIMIENTO DE DEUDA EN SOLICITUD DE APLAZAMIENTO”

5. Now clic onto “ACEPTAR”.

6. Next, a confirmation message will appear, which indicates that the presentation of the request for payment is pending.

7. Clic onto “TRAMITAR DEUDA”. This will take you to the payment details.

8. At the top of the page, you will see the word “APLAZAR” (=postpone). Clic it.

9. Now you will log into the postponement request registration. Various modalities will be displayed. Choose the option “SOLICITUD DE FRACCIONAMIENTO EXTRAORDINARIO IRPF 2020 PARA BENEFICIARIOS DE PRESTACIONES ERTE (ORDEN HAC/320/2021) – FRACCIONAMIENTO ERTE”

10. A message will appear. Accept it.

11. The last step consist of indicating your bank details (IBAN, SWIFT, etc.)

12. Finally, sign and send your tax return.

For further information: www.fernandezbaladron.com

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