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Tax changes for 2017: how the new state budget may affect you

Tax changes for 2017: how the new state budget may affect you

Tax changes for 2017: how the new state budget may affect you

The presentation of the new state budget, not yet approved and subject to changes, brings some good and bad news. We will try to show some of the major proposed changes for 2017.

First of all, there are new taxes that will be created, such as the case of additional IMI tax will now be levied on taxpayers who have real estate assets above 600,000 euros, and the new fat-tax which will focus on soft drinks. At the same time, the tax will also make more expensive the use of tobacco or alcohol.

  1. IRS brackets will be updated and surcharge eliminated

The levels of annual income tax base that are used by tax authorities to calculate the IRS that families have to endure will change. The rates to be applied remain the same, the number of steps as well (five) but the values that are considered in each category have been updated to reflect the rising prices of goods and services. The new brackets mean less rentention on source and more money to the employee.

The IRS surcharge seems to come to an end in 2017, but this will be phased, depending on the income of taxpayers. The higher the income of a taxpayer, he later he will stop paying the surcharge.

  1. New tax on real estate assets above 600,000 euros

As previously announced in the media, the proposed state budget for 2017 includes a new tax – entitled “additional” to the tax on real estate”, also known as IMI. This new tax will focus on taxpayers who have a portfolio of real estate assets, higher than 600 thousand euros.

In the case of joint ownership, the level on which the new tax will be taxed is 1, 2 million euros (600 thousand euros x 2). Thus, the value that exceeds the threshold set a rate of 0.3% is applied.

Practical example:

If a taxpayer who has five properties with a book value set of 800.000 euros. The value clears up as follows: (800 thousand euros – 600,000 euros) x 0.3% = 600 euros

But beware: Not all owners will be required to pay this new tax. The proposed law states that are excluded urban buildings classified as industrial, as well as licensed for tourism. This new tax will be payable in September and will revert to the Social Security.

  1. Owners of local lodging will pay more tax on their short term lets

The owners of local accommodation properties registered for short-term lets (AL) will have to face a tax increase in 2017. So far the non-residents owners were paying 3.75% of tax on their gross rentals and will pay from now on 8.75%.

This tax increase will only be noticed in their IRS bill for 2017, which is payable in August 2018.

  1. Car Tax (IUC) will increase by 0.8%

Who has car also feel your wallet getting lighter by the rise in vehicle excise duty. The tables have been updated, which results in an average 0.8% increase that vehicle owners will have to bear next year with this tax.

  1. Tax on new vehicles (ISV) will increased by 3%

To buy a car will also be more expensive next year, this is due to the new values of the vehicle tax (ISV) which are included in the final price of the cars.

  1. A new tax on sugary drinks

From next year soft drinks with added sugar or other sweeteners will become more expensive. This is because the government has decided to create a new fat-tax. The rates to be applied vary depending on the sugar levels of the drinks in question. It’s estimated that soda prices may endear between eight and 16 cents.

  1. Tobacco will become more expensive

Similar to what had happened in 2016, next year the tax on tobacco will be aggravated. Cigars, cigarillos and electronic cigarettes feel a tax increase. A pack of cigarettes with a value less than 4.70 euros may become more expensive between five and 10 cents.

  1. Tax on alcoholic beverages is compounded

Drinking some alcoholic drinks such as beer or spirits, will be more expensive in 2017. Similar to what had happened in 2016, the tax increases in these products. The tax increase is 3%. But not all alcoholic beverages feel this measure, as the wine is not included. We drink to that, cheers!

  1. People with disabilities are going to pay less IRS

The proposed State Budget for 2017 reduces the tax for people with disabilities. For IRS purposes, shall only be considered 85% of the gross income received by disabled taxpayers who are entered in the category A and B (dependent and independent workers); and 90% if included in the category H (pensioners).

  1. Investing in startups gives benefit in IRS

This is a new Program, which aims to encourage the allocation of savings and capitalization of startups by private investors. In total, taxpayers may deduct 25% of the investments made in each year until the limit of 40% of its IRS bill.

  1. IRS submission

Last but not least, another novelty is related to the IRS deadlines. The IRS shall be submitted at the same time, irrespective of the category of earning. The dates for the IRS 2016 submission will be from April the 1st to the end of May.

If you have any other questions, please feel free to contact us; tax planning is critical and you and your company, cannot afford surprises. Pass by our office for a friendly chat and find out more about the tax strategy that might be more effective on your specific situation.