Spain’s 2025 Tax Overhaul: A Guide for Businesses and Individuals

Europe
Last update: 2/7/2025

In December 2024, Spain enacted a series of tax reforms through the Royal Decree-Law 9/2024, which introduces crucial changes to the tax landscape for individuals, businesses, and various sectors starting from January 2025. Whether you are an international investor, a multinational corporation, or an individual with interests in Spain, understanding these changes is vital to ensure compliance and make the most of potential opportunities in Spain’s evolving tax system. 

This article delves into the key tax updates affecting Personal Income Tax (IRPF), Corporate Tax, VAT, and more, providing global readers with a clear understanding of how these changes could impact your tax strategy and operations in Spain. 

1. Key Changes in Personal Income Tax (IRPF) 

Personal income tax in Spain has seen several important updates that will affect both residents and non-residents earning income in Spain. The new reforms are designed to simplify the tax process for individuals while encouraging sustainable practices in housing and transportation. 

Increased Tax Filing Exemption Threshold 

One of the most significant changes is the rise in the tax filing threshold for individuals with multiple sources of income. From January 1, 2025: 

  • No Filing Requirement for Lower Income: If you earn up to €15,786 and only have one income source, you won’t need to file a tax return. 
  • Income from Multiple Payees: If you receive income from multiple employers or sources, the filing threshold increases to €22,000 annually, but only if the total income from secondary sources does not exceed €2,500. Previously, this threshold was €1,500. 

This change aims to reduce administrative burdens, especially for those with multiple income sources such as freelancers, contractors, or employees with side jobs. 

Extended Tax Deductions for Home Renovations 

Spain is focusing on energy efficiency and green initiatives with tax incentives that encourage individuals to improve their homes. The tax deductions for energy-efficient home renovations, such as reducing heating and cooling needs, have been extended until December 31, 2025. These benefits apply to: 

  • Works to reduce heating and cooling demands: You can claim a deduction for expenses incurred for such improvements in your primary or rental property. 
  • Works for better energy consumption: Tax deductions are also available for works that improve the energy efficiency of homes, especially those reducing the use of non-renewable energy. 

Electric Vehicle (EV) and Charging Station Incentives 

Spain is prioritizing sustainability and encouraging the use of electric vehicles (EVs) and charging infrastructure. The deadline for claiming tax deductions for these investments has been extended until December 31, 2025. 

  • EV Purchase Deduction: You can benefit from a tax deduction if you purchase electric or plug-in hybrid vehicles by the end of 2025. 
  • Charging Station Deduction: Spain continues to offer tax breaks for businesses and individuals installing EV charging stations at their properties until the end of 2025. 

These measures align with Spain’s long-term environmental goals and present a compelling opportunity for international businesses or individuals seeking to adopt green technologies. 

2. Corporate Tax Reforms: Key Updates for Businesses in Spain 

Corporate taxes in Spain have also seen adjustments, with a focus on promoting sustainability and energy independence. Global businesses operating in Spain or with ties to the country should be aware of these changes, which include tax incentives for renewable energy and specific treatment for certain industries. 

Extension of Tax Benefits for Renewable Energy Investments 

In line with Spain’s green transition goals, corporate taxpayers investing in renewable energy installations will continue to enjoy accelerated depreciation benefits. This provision is aimed at businesses making investments in: 

  • Solar, wind, and other renewable energy sources: Businesses can now amortize investments in renewable energy equipment faster, reducing their taxable profits and enhancing cash flow. 
  • Energy Efficiency Projects: Companies investing in self-consumption renewable energy systems, such as solar panels, can also benefit from this measure if the systems replace fossil fuel-based energy sources. 

These incentives, in place for fiscal years beginning on or after January 1, 2025, are designed to reduce reliance on fossil fuels and promote Spain’s renewable energy market. 

Tax Incentives for Sports Events 

To increase Spain’s appeal as a host for international sports events, the government has introduced tax benefits for hosting major sports tournaments, particularly those related to UEFA competitions. These benefits will be available for events like the UEFA Women’s Champions League Final in 2024 and UEFA Europa League Final in 2025, with the aim of boosting Spain’s international tourism and economic growth. 

3. Changes to VAT Regulations 

VAT reforms are another area of focus under Spain’s 2025 tax changes. The government has introduced measures to simplify VAT reporting for small businesses and adjust VAT rules for specific industries. 

Simplified VAT Regimes for Small Businesses 

For smaller businesses, particularly those in agriculture, fishing, and certain services, Spain continues to apply the simplified VAT regime. Under this regime, businesses can benefit from reduced reporting requirements and simplified VAT calculations. These updates are designed to reduce the administrative burden for small businesses, allowing them to focus more on growth and profitability. 

  • The eligibility for this regime has been expanded, with a VAT threshold increase to €250,000 in annual income for many small enterprises, extending the simplified filing options through 2025. 

Fuel and Gasoline Taxation Changes 

Spain has updated its fuel-related VAT policies to align with the EU’s broader environmental goals. The new operator reliable certification system includes a reduction in the volume of fuel tax warehouse operations required to be eligible for the “reliable operator” designation. This streamlines the process and enhances compliance within the fuel sector. 

4. Key Considerations for Global Businesses and Investors 

As Spain’s tax system evolves, businesses both inside and outside of the country must stay informed about these changes to optimize their tax planning and compliance efforts. 

  • Global Implications for Businesses: Companies operating in multiple jurisdictions should consider how Spain’s tax incentives, especially for renewable energy investments, may intersect with their global tax strategies. With Spain’s focus on sustainability, these reforms offer a chance for businesses to align with global green goals while benefiting from tax deductions. 
  • Impact on International Tax Filings: For non-resident individuals and global corporations operating in Spain, ensuring that all tax filings are aligned with the new thresholds and rules is crucial to avoid penalties and ensure efficient tax planning. 

5. How TaxDo Can Help You Navigate These Changes 

At TaxDo, we specialize in providing expert tax services to businesses and individuals around the world, guiding them through Spain’s evolving tax landscape. Whether you’re an international investor seeking to navigate Spain’s renewable energy tax benefits, or a business owner wanting to ensure compliance with the new VAT rules, TaxDo is here to support you every step of the way. Our team of seasoned tax professionals offers comprehensive tax planning and consulting services, helping you maximize your financial opportunities while minimizing risks in Spain’s complex tax environment. 

With TaxDo, you gain a trusted partner committed to simplifying the tax process and optimizing your global tax strategy.