- Pensions stay in 2020 at their 2019 amount, pending a 0.9% rise with effect from January.
- The flat-rate regime limits for income tax and VAT and the Wealth Tax are extended for 2020.
- There is a one-month window to opt out of the flat-rate or simplified regime.
On 28 December 2019, the BOE published Royal Decree-law 18/2019 of 27 December, adopting certain measures on tax, cadastre and Social Security, in force the next day. It responds to the situation of a government in a caretaker role since April, which has not been able to approve a 2020 budget and needed to extend measures that expired with the year.
On pensions, those of the contributory system, civil-service pensions and other benefits are provisionally kept at the amounts they had on 31 December 2019, pending the government with full powers updating them by 0.9%, retroactively from 1 January. The decree also extends the 2019 contribution rules, with the maximum base at €4,070.10 a month, and keeps the 2019 minimum wage until the 2020 one is approved. Other measures are more technical, such as those on repaying a loan to Social Security, and do not directly affect individuals.
Self-employed and small businesses
On tax, the decree extends for 2020 the higher limits for applying the objective estimation method, known as módulos, in income tax, and for the simplified regime and the special regime for agriculture, livestock and fishing in VAT. The general ceilings remain at €250,000 and €125,000, instead of falling to the €150,000 and €75,000 previously planned.
As a result, a period of one month opens from the day after publication to file a waiver, or revoke a waiver, of these regimes with effect for 2020. Anyone unsure whether it suits them to stay in the flat-rate regime or move to direct estimation should decide within that period, which is short.
Wealth, patronage and cadastre
The decree keeps the Wealth Tax in 2020, which since 2011 had been extended annually. For families with large assets, this means the obligation to file and pay remains for one more year, with the differences between regions that already existed, such as each territory’s own allowances.
The patronage rules are also updated, so that for 2020 deductions for donations to priority activities rise by five percentage points, and the update coefficients for cadastral values are set, at 1.05, 1.03 and 0.97 according to the year of the valuation report. These coefficients influence the property tax and other taxes based on cadastral value. Property owners should check the cadastral value and the coefficient applicable to their municipality, because the revision of values affects the base of several local taxes.
What to review
Self-employed people and small businesses in the flat-rate regime should review with their adviser, before the period ends, whether it suits them to stay or change method, comparing the real payment with the estimated one and the administrative costs of direct estimation. It is a decision with effects for the whole year.
Families with assets, or with property, should keep in mind the changes to Wealth Tax and the cadastre, and those making donations can assess the temporary increase in deductions. Pensioners should know that the planned rise will apply retroactively when the government approves it. Consult your adviser for your specific case. Pensioners and workers should not read this decree as a change of course: it is a provisional solution until there is a budget.
When there is no budget, a year-end decree keeps the rules in place, but it forces decisions within deadlines.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
