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British expats living in Spain He should be wary of the promises made by Spanish Prime Minister Pedro Sanchez to I on the assigned redemption fund. The Spanish leader has approved a number of tax increases that will see drivers suffer even more.
The Spanish government is planning a fiscal reform that will increase personal income tax, wealth tax, inheritance tax, diesel price, and more.
This was revealed in the “Recovery, Transformation and Resilience Plan”, which is one of the EU’s conditions for Spain to receive 79.5 billion euros in support until 2023.
Madrid plans to “review the rates that tax the registration and use of vehicles in order to adapt them to environmental standards”.
In other words, this will likely necessitate modifying or eliminating existing tax benefits for vehicle registration and road taxes, although this has not yet been confirmed.
Currently, vehicles with CO2 emissions not exceeding 120 g/km are exempted from paying the vehicle registration tax, which is determined by the regions.
British expats in Spain will see tax increases due to the EU
All other vehicles pay the vehicle registration tax according to their carbon dioxide level, which is between 4.75% and 14.75% of the tax base (price before taxes are applied).
Spain’s road tax requires drivers to pay an annual fee set by their municipalities, which is usually calculated based on the vehicle’s power and type.
Although the Spanish government did not explicitly mention this in its report, it did write about “a review of cuts to hydrocarbons used as fuels for the gradual settlement of tax rates based on their polluting power.”
This marks the end of the diesel bonus and will see its taxes closer to the gasoline tax, meaning that drivers using diesel cars will pay more to fill up the tank, around €3.45 per month per driver.
Spain has also waived pressure from the European Union to impose more tolls on its roads.
The Spanish government had already drafted a project for presentation in Brussels describing how it would introduce a toll system across its network of motorways and high-capacity roads to cover huge maintenance costs.
They have since hinted at the fact that the introduction of the fee – the peacock – across the entire network could take place in 2024.
As things stand, Spain is one of the countries in Europe where drivers pay the least cost to use the high-capacity road network, spending 76 percent less on tolls than the EU average.
The Spanish government also wants there to be a “gradual increase in the maximum contribution base for the tax system”, which in practice will lead to a greater tax burden for those whose monthly earnings are more than €2,400 per month.
The basis of the contribution is the gross monthly wage, including prorated bonuses, received by the worker.
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Spain signed a recovery fund last month with Ursula von der Leyen
At the moment, the maximum contribution base is a total of 4,070.10 euros per month. Workers who earn more than this amount are exempt from paying tax on the remainder of their income.
In other words, if a person has a contribution base of 5,000 euros per month, they will not be taxed for the additional 929.90 euros they earned.
This amendment to the maximum contribution rules, which the Spanish government will implement gradually over the next 30 years, will also “adjust the maximum pension so as not to change the nature of the contribution to the tax system”.
Sanchez has also made plans for the country’s “tax harmonization,” which focuses heavily on wealth, inheritance and gift taxes.
These tax rates are currently set by the Spanish state, but all 17 regions of the country have the right to apply exemptions or conditions to make them more beneficial or harmful to taxpayers, with the general trend towards the former.
This could change soon, though.
“In the area of wealth taxation, there are significant improvements to be made, both from a technical point of view and from the perspective of implementing a coherent redistribution policy at the national level,” the government document states.
There is “a need to apply wealth taxes in a more coordinated manner between the various regions to ensure a harmonized minimum level of taxation, and to avoid harmful tax competition between the various autonomous communities.”