Key Tax Regulations Await Full House Vote: What's Approved and What's at Stake
The regulation establishing a minimum tax for multinationals, along with significant components of the government's fiscal package, has cleared the committee stage in Congress and is set for a vote in the Full House on Thursday. The outcome of this vote is crucial, as it will determine the future of both the law and the proposed amendments.
The Finance Committee has endorsed the transposition of a directive instituting a minimum tax rate of 15% for multinationals, incorporating various amendments into the legislation. Now, the Full House faces a binary choice: approve the entire package, including amendments, or reject it altogether.
Among the approved measures are a two-point increase in income tax for capital incomes exceeding 300,000 euros, raising the applicable rate from 18% to 20%. There are also new taxes on vape products and heightened tobacco taxation. Additionally, modifications to corporate tax laws are designed to address the annulment of earlier reforms by the Constitutional Court, which includes limiting the compensation of taxable bases and deductions for double taxation, reversing value impairments, and extending the timeline for offsetting subsidiary losses.
Further regulatory changes aim to combat tax fraud in the hydrocarbons sector, while a gradual reduction in corporate tax rates is on the table for companies earning below one million euros and cooperatives. The proposed changes also include a push to modify the European VAT directive to apply taxes to tourist apartments.
Conversely, several elements of the government's fiscal package were rejected during the committee phase, though the possibility remains for those measures to be revived in the Full House vote. Among these rejected proposals is a new tax on bank interest margins and commissions, which would have replaced the existing temporary levy. Despite the initial setback, agreements reached with ERC, Bildu, and BNG suggest that higher brackets for tax rates may still be introduced.
Other rejected measures include raising diesel taxes, imposing a 21% VAT on tourist apartments, taxing private health insurance, enacting a large inheritance tax, and eliminating favorable tax regimes for SOCIMIs. Though these initiatives were not approved, they might still be introduced during the Full House deliberations.
As for the levy on large energy companies, it was not sanctioned in the committee session. However, a tentative agreement between ERC, Bildu, BNG, and the government suggests the levy could be extended until 2025 through a royal decree.
Looking ahead to Thursday's Full House session, uncertainty prevails. It’s possible that the transposition of the law—with its incorporated tax measures—will gain approval, or new initiatives may surface during the debate. Alternatively, the committee's report could be rejected entirely, jeopardizing the legislation.
The government has rallied support from its coalition partners, including PSOE and Sumar, as well as PNV and Junts. Last-minute negotiations have brought ERC, Bildu, and BNG into alignment with the proposed measures. There is, however, tension surrounding the agreement on the energy tax, as it seems incompatible with Junts’ proposal for elimination. The Ministry of Finance has indicated that its commitment to Junts remains intact, allowing them to exempt energy companies that commit effectively to investments in decarbonization.
All eyes are now on Podemos, whose four votes may ultimately determine the fate of the law. Secretary General Ione Belarra has indicated that their support hinges on the maintenance of the energy tax, leaving ambiguity about whether the arrangements negotiated recently will suffice to secure their backing. The overall momentum of this legislation relies heavily on whether Podemos chooses to support it; abstention or dissent could lead to a precarious outcome, resting on the vote of former socialist deputy José Luis Ábalos and the Coalición Canaria's stance.
As the Full House vote approaches, the fate of these critical tax reforms hangs in the balance, with significant implications for multinationals and the broader economic landscape.
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