Spain: Valencia & Catalonia propose retroactive personal income tax reductions (IRPF) for FY 2023

The Generalitat of Catalonia is working on reducing the regional section of the Personal Income Tax (IRPF). The “Govern” proposes in the budget accompanying law, cutting one percentage point – from 10.5% to 9.5% – the first tranche of the tax rate that will benefit taxpayers with a gross income of up to 33,000 euros yearly.

For the rest of the taxpayers, the measure will have a neutral impact since the taxation in other sections would be adjusted upwards slightly (a few tenths) so that those who earn more than 33,000 euros will not have any impact and will continue to pay the same as before, now.

On the other hand, they have proposed reducing the number of personal income tax brackets from the current nine to eight. With this change, the aim is to make the limits between sections higher and thus prevent a salary increase to compensate for the inflation of recent months, from causing some taxpayers to end up paying a higher rate than until now.

The measure, which would initially be applied in 2024, would be in force retroactively on January 1, 2023, to be used in the next tax return in 2024. A similar measure issued in 2020 was annulled by the Constitutional Court Sentence 186 /2021, 28 October 2021, published in BOE no. 282, of 25 November 2021.

In the Valencian Community, a similar measure is being prepared in the Law of Fiscal Measures, Administrative and Financial Management and Organization of the Generalitat of 2024.

Among the new tax relief measures, the one known as the Accompaniment Law includes deductions of up to 150 euros for 30% of the expenses generated by members of the family unit who need help due to suffering from any pathology assimilated to mental health problems, as well as deductions of up to 100 euros for expenses incurred by members of the family unit with highly complex chronic diseases or those called rare, which may be increased to 150 euros if the family unit is large or single-parent.

In addition, a 30% deduction of up to 150 euros is incorporated for amounts paid for expenses associated with oral health; a 30% deduction of up to 100 euros for expenses allocated to the acquisition of prescription glasses, contact lenses and cleaning solutions, as well as a deduction of up to 100 euros for expenses generated by members of the family unit diagnosed with acquired brain damage or Alzheimer’s, which will increase to 150 euros if the family unit is large or single-parent. Likewise, a deduction of 30% up to 150 euros is included for expenses associated with sports practice.

In addition, the reduced rate of 6% is established for the purchase of a primary residence by young people under 35 years of age, as well as for buyers of officially protected housing under the general regime, provided that the home’s value is up to 180,000 euros.

Likewise, a super-reduced rate of 3% is established for the purchase of a habitual residence under special official protection and for the purchase of housing for large and single-parent families, people with disabilities and women subject to gender violence, with 180,000 euros also being the limit of the rate. home value.

In the case of personal income tax deductions and just like what is established for Catalonia, the tax reform will be applied retroactively so that the savings occur in the 2023 income tax return and returns with an individual taxable base of up to 32,000 euros and a joint taxable base of up to 48,000 euros may benefit.

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