Tax Law Changes in Spain 2025: Key Reforms and What They Mean

Introduction

In 2025, Spain has introduced several important changes in its tax laws (IRPF – personal income tax; Impuesto sobre Sociedades – corporation tax; regional taxes; etc.) as part of a broader “fiscal reform package.” These reforms are intended to respond to inflation, address inequalities, increase competitiveness, and ensure sustainable public finance. Below are some of the notable changes.

Major Changes

1. Law 5/2025 and a New Deduction for Low-Income Workers
   • Law 5/2025 (24 July) introduces a deduction for individuals who earn low wages. This deduction aims to offset the upward impact of taxes on those near the minimum wage threshold. (Agència Tributària)
   • It applies retroactively from 1 January 2025. (vivireneuropa.eu)
   • Eligibility: workers with gross employment income ≤ €18,276/year, and with other income (non-employment income) that does not exceed €6,500/year. (Diario AS)
   • Amount: up to €340 per year for those earning up to €16,576. For incomes between €16,576 and €18,276, the deduction phases down. (Diario AS)
2. Changes in the Savings Base Tax Rate (Escala del Ahorro)
   • As of 1 January 2025, Spain increased the top rate of the savings income scale: the highest bracket now is 30% (previously 28%) for savings base above €300,000. (vamoscontufuturo.ibercaja.es)
   • The structure of the savings tax base remains progressive, so this affects those with significant investment income. (vamoscontufuturo.ibercaja.es)
3. Updates to Impuesto sobre Sociedades (Corporate Tax)
   • There are adjustments in deducible donations: higher percentages and higher limits for deductions both for general donations and for those directed to “priority” non-profit / cultural / charitable causes. (Wolters Kluwer)
   • Also, measures to adjust compensation of negative taxable bases (negative “BIN” or bases imponibles negativas) in fiscal groups are extended into 2024 and 2025. (graconsultores.com)
4. Regional Tax Measures: Sucesiones y Donaciones (Inheritance and Gift Tax) in Madrid
   • The Madrid regional government has approved a further tax cut in the Inheritance & Donations tax. (ElHuffPost)
   • Specifically, the bonification (i.e. rebate) for operations between siblings, and between uncles/aunts and nephews/nieces (Group III of kinship) increases from 25% to 50%. Also, smaller donations (< €1,000) between private individuals may be exempted from the requirement to file a tax return. (ElHuffPost)
5. Other Fiscal Measures & Adjustments
   • Certain vehicles (“mixed vehicles” used partly for business) have updated rules under the tax authority following a decision of the Central Economic-Administrative Tribunal (TEAC), affecting how they are treated for deductions. (Agència Tributària)
   • Extension of limits on how negative taxable bases (losses) may be offset within fiscal groups, as noted above. (graconsultores.com)

Potential Impacts

• Low-Income Workers: The new deduction under Law 5/2025 helps reduce their tax burden, particularly for those earning near the minimum wage. Might improve disposable income slightly for this group.
• Investors: The rise to 30% in top savings rate affects high savers / those with large capital income; increases tax on investment returns above high thresholds.
• Corporations & Non-Profits: More generous donation deductions incentivize giving, but there may also be greater complexity in complying. Also, the rules on offsetting past losses (in groups) require attention.
• Regional Differences: Autonomous Communities (e.g. Madrid) continue to use their powers to adjust regional taxes like Inheritance/Gifts, leading to tax “competition” among regions; taxpayers in different regions may see varying burdens.
• Compliance & Administrative Work: New forms, updated rules, retroactive effects mean more administrative work: taxpayers need to check whether they qualify for new deductions; companies must adjust their accounting / tax planning; beware of transitional periods and retroactive impacts.

Challenges & Considerations

• Progressivity & Inflation: Some critics note that while certain rates or brackets are updated (e.g. savings tax rate), the general IRPF scale hasn’t been fully adjusted for inflation, so many taxpayers may be pushed into higher tax rates without a corresponding increase in real income. (vamoscontufuturo.ibercaja.es)
• Fiscal Federalism & Equity: Diverse regional policies (like Madrid’s in Inheritance & Gifts) may lead to disparities in tax treatment across the country.
• Implementation Complexity: Retroactive applying of deductions (from start of 2025, or for previous years) can complicate filings; taxpayers might need to use specific forms or wait for regulatory guidance.
• Behavioral Responses: Higher rates on investments / savings might affect investment decisions; more generous donation deductions might stimulate nonprofit funding but also introduce strategic planning to maximize benefits.

Conclusion

Spain’s tax changes in 2025 show a mix of redistributive measures (helping lower income workers), increased taxation of high incomes or savings, and regional tax competition as autonomous communities tweak local taxes. For individuals and companies, the reforms bring both opportunities (deductions, rebates) and challenges (higher rates in some cases, more complexity). As always, much will depend on how implementing regulations are framed, how clearly the transitions are handled, and how well taxpayers and advisors understand the changes.