The 2023 fiscal year opened with a significant package of tax reforms affecting both individuals and corporate entities. The conversion of Royal Decree-Law 18/2022 into permanent law introduced the new temporary Solidarity Tax on Large Fortunes, amendments to Corporate Income Tax for the banking sector, and a surcharge on energy companies.
Corporate Tax: New Rates for Banking and Energy
Credit institutions and groups engaged in oil and gas exploration, extraction or production became subject to increased Corporate Tax rates during 2023 and 2024. Financial entities saw the new temporary levy apply at 4.8% on their interest income and fee revenues, in addition to their standard taxation.
For energy companies, the 1.2% levy on revenues created an extraordinary burden that many incorporated into their cost structures and medium-term tax planning.
Both levies — governed by Law 38/2022 of 27 December — are temporary in nature (planned for the 2022 and 2023 financial years), although their possible extension was the subject of political debate throughout the year. Affected companies needed to revise their cash flow forecasting models to incorporate the impact of these additional payments.
Solidarity Tax on Large Fortunes
Entering into force on 29 December 2022, this tax applies to net assets exceeding three million euros at rates ranging between 1.7% and 3.5%. Its temporary nature — initially planned for two years — and potential unconstitutionality for encroaching on regional competences sparked intense debate.
The applicable rate scale is as follows: 0% on assets up to 3 million euros; 1.7% between 3 and 5.3 million; 2.1% between 5.3 and 10.7 million; and 3.5% above 10.7 million euros. A 100% rebate was foreseen for residents in autonomous communities that had already fully rebated Wealth Tax (such as Madrid), although this point was initially challenged.
At BMC we recommend clients with affected assets to review previously filed Wealth Tax returns, consider challenging assessments, and analyse their asset structure to optimise the combined tax burden.
Withholding Taxes and Advance Payments
The withholding rate on certain capital income remained at 19%, but advance payment obligations under Corporate Tax were adjusted for groups with turnover exceeding ten million euros, who must calculate their advance payment on the current period tax base.
This change in the calculation method for large companies (Article 40.3 CIT Act) means that the April advance payment is calculated on the actual taxable base accumulated to 31 March, applying the applicable rate. For groups with variable or seasonal results, this can create tighter cash flows in the first quarter compared to the prior-year method.
IRPF Modifications for the Self-Employed and Professionals
The introduction of the new social security contribution system for the self-employed based on actual income — phased in gradually until 2031 — introduced changes to the deductibility of Social Security contributions in personal income tax returns. The new system requires the self-employed to project their annual income and adjust their monthly contribution according to the income bracket table established by Royal Decree 504/2022.
Additionally, the tax benefits for workers under the simplified direct estimation regime were maintained, with the 7% reduction for hard-to-justify expenses for the self-employed under standard direct estimation.
Changes to Corporate Tax Deductions and Allowances
The reform strengthened deductions for R&D&i (Articles 35 and 36 of the CIT Act), expanding applicable percentages for projects with a digital or artificial intelligence component. The deduction for investment in film and audiovisual productions also reached up to 25% of production costs for the producer and up to 20% for the financial co-producer.
For SMEs, the equalisation reserve (Article 105 CIT Act) continued to be an effective tool for anticipating the offset of possible future losses, with a limit of 10% of positive taxable base up to a maximum of one million euros per period.
Recommendations for 2023
- Review corporate group structures to identify impacts from the new levies.
- Coordinate Corporate Tax planning with the Q1 close.
- Analyse the deductibility of financial expenses under the new rules.
- Assess the viability of challenging the Solidarity Tax if assets exceed the threshold.
- Review the advance payment calculation base if turnover exceeds ten million euros.
- Update cash flow forecasting models to incorporate the new levies.
At BMC we guide clients through every stage of regulatory adaptation. See our tax planning services to design an optimal fiscal strategy for the year.
