- Royal Decree-law 4/2024 extends the cut in VAT on basic foods to the end of the year, with a gradual phase-out in the last quarter.
- It sets 15,876 euros as the limit for the obligation to file in several cases and readjusts the earned-income reduction, with effect from 1 January.
- Olive oil will be taxed at 0% until 30 September and permanently at 4% from 2025.
Royal Decree-law 4/2024 of 26 June, published in the Official State Gazette (BOE) on 27 June, extends certain measures against the economic and social consequences of the conflicts in Ukraine and the Middle East and adopts other urgent tax, energy and social measures. It takes effect the day after its publication, although most of the tax measures have their own effective dates. The Tax Agency published a summary of its provisions the same day.
The most visible measure is the VAT cut on basic foods, which is maintained but with a gradual phase-out, in three-month stages, until the end of the year. In income tax, the text adapts the tax to the new minimum wage approved in February so that those who earn it neither pay tax nor bear withholding. And from 2025 it sets olive oil permanently at the super-reduced rate.
Food VAT, in phases
From 1 July to 30 September 2024, basic foods (ordinary bread and bread flour, milk, cheese, eggs, fruit, vegetables, pulses, tubers and cereals) will continue to be taxed at 0%, and olive oil joins this list. Seed oils and pasta will be taxed at 5%. From 1 October to 31 December, those rates move to 2% and 7.5% respectively. In other words, consumers will notice a relative price increase in the last quarter of the year.
From 1 January 2025, the basic products on that list, including olive oil, are permanently included in the super-reduced rate of 4%. The rule provides that the cuts must benefit the consumer in full and provides for monitoring of price developments.
Income tax and the minimum wage
With effect from 1 January 2024, the royal decree-law rewrites the reduction for earned income: 7,302 euros for those with net earned income equal to or below 14,852 euros, with a decreasing reduction up to 19,747.5 euros, provided they have no other income above 6,500 euros. It also sets at 15,876 euros, the annual minimum wage figure, the limit above which there is an obligation to file when income comes from more than one payer, among other cases.
The effect is felt at two moments: in monthly withholding, which had already been corrected by Royal Decree 142/2024, and in the annual return, where the reduction consolidates the benefit. For those who earn close to the minimum, it may mean not being obliged to file or paying less.
What to review
For families, the first step is to know how much of their food spending will be affected by the staggered timetable and to anticipate the effect of the 1 October change. For those who already file, it is advisable to check whether, with the new threshold and the new reduction, their situation for the 2024 return changes.
Businesses, for their part, must update their invoicing systems to the rates in force at each stage and remember the obligation to pass the cut on to the consumer. The royal decree-law also contains measures on free depreciation of electric vehicles and charging points, the extension of electricity social tariff discounts and benefits for the island of La Palma; for your specific case, consult your adviser.
The anti-crisis measures are prolonged, but with a staggered exit that is worth putting in the calendar.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
