Tax increase applicable on income tax returns in Spain for 2021

Nicolás Emery, a lawyer and economist at Moya & Emery, breaks down the tax increase on income tax returns in Spain for 2021.

This year, one of the most important new features is the tax increase on higher incomes. From now on, there will be an increase in the withholding tax on earned income in the national tax bracket of up to 24.5 per cent for incomes exceeding €300,000 per year.

It should be considered that this means that the maximum tax rates will be significantly different when applying the regional tax brackets. In the specific case of the Balearic Islands, the rate goes up to 48.5 per cent.

The tax rate for savings also rises. Now a new bracket has been added, meaning that there are now four brackets: up to €6,000 euros taxed at 19 per cent; from €6,000 to €50,000 taxed at 21 per cent; from €50,000 to €200,000 taxed at 23 per cent; and more than €200,000 taxed at 26 per cent.

Continuing with the “bad news”, changes in pension plans mean that this year they will have less deductions. This year the maximum deduction for private pension plans changes to €2,000 per year (in 2020 it was €8,000). And although it may seem that the opposite is true, this year we are actually in luck, as it will continue to be adjusted over the next few years.

The limit applied to 2022 for contributions to individual pension plans will be reduced to €1500 or 30 per cent of the net income from work or economic activities of the self-employed.

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