Spain’s Budget 2025

Setting the stage: Brussels wants homework in October
While the UK plays calendar Enie Meenie minie mo with Spring/Autumn Budgets (and the occasional “surprise!” emergency one), the EU prefers punctuality. Every October, member states hand in their budgets like model students. In 2024, everyone also had to submit a four-year plan to steer national debt toward (or below) 60% of GDP—the EU’s collective happy place.

Spain, after a domestically bumpy 2024 (Reuters politely called the 2024 draft “discontinued,” which is the fiscal equivalent of “we meant to do that”), pivoted to 2025—and got Brussels’ nod in late November for a longer seven-year clean-up plan under the rebooted EU fiscal rules. Translation: fewer vibes, more spreadsheets.

What actually changed (a.k.a. the “please don’t shoot the messenger” bit)

Goodbye, tax holidays

• Basic foods slid back to their usual 4% VAT, olive oil included (collective sigh across Iberia).
• Electricity returned to 21% VAT.
• Fuel duty nudged up.

Net result: monthly bills did the opposite of “Mediterranean chill.”

Nine new tax rises for 2025
Congress kicked off the 2025 tax year with nine approved increases, targeting roughly €4.5bn/year in extra revenue. Among the eyebrow-raisers:
1. “Bank Tax”: A progressive levy on net interest margin + commissions earned in Spain (roughly 1% to 7%).
2. Savings Income Tax: For incomes over €300,000, the top rate rises from 28% to 30%.

*Yes, this can touch insurance policy withdrawals and other taxable gains—mainly relevant for the well-heeled.

Business translation: banks are the piñata; high-net-worth savers bring an extra 2% candle to the tax cake.

• PM Pedro Sánchez framed it as an “unprecedented” step amidst a housing emergency, warning against a society split into “rich landlords vs. poor tenants.”
• He cited 27,000 homes bought by non-EU residents in 2023 “not to live in, but to make money.”
• The Property Registry estimated foreigners (EU + non-EU) were ~15% of sales in 2023 (~87k of 583k total).

Important fine print: This is about plans and proposals being discussed, not a done deal. If you’re a non-EU buyer, keep your lawyer on speed-dial and your pulse steady.

Wealth & Solidarity: the sequel nobody asked for (but everyone pays attention to)

Spain has long had Wealth Tax for residents with net wealth ≥ €700,000, but regions can—and did—play with allowances. Madrid and Andalucía famously went full 100% relief.

Cue the central government’s 2022 plot twist: a “temporary” Solidarity Tax layered on top, using Wealth Tax rules as the base. Exemptions broadly still apply (primary home up to €300,000, business assets when it’s your main activity, and qualifying shareholdings >5%—or >20% family-owned). After exemptions, Solidarity hits at:

• €3m – €5,347,998: 1.7%
• €5,347,998 – €10,695,996: 2.1%
• Above €10,695,996.06: 3.5%

Also remember: non-residents can face Wealth Tax on Spanish-sited assets. Double Tax Treaties may soften the edges—but bring a professional to the knife fight.

• Madrid: 99% relief for Groups I & II (close family) for years now, plus 25% relief since 2023 for siblings, uncles/aunts, nephews/nieces.
• Andalucía (since 2022): €1m allowance + 99% relief for spouses/ascendants/descendants (inheritances; gifts differ). Group III allowance €10,000, top rate 26%.
• Balearic Islands (from 18 Jul 2023): 100% reduction for Groups I & II (residents only). Group III? -50% for siblings/uncles/aunts/nephews/nieces; -25% for in-laws.
• Canary Islands (from 6 Sep 2023): 99.9% reduction for Groups I–III, and for gifts to I–II.
• Valencia (draft approved 5 Sep 2023): 99% reduction for Groups I & II, mirroring Murcia/Andalucía vibes.

Estate-planning translation: check your postcode—it matters more than your zodiac sign.

Who should care (and why)

• Banks: Expect margin/comms to feel… taxed. (On the bright side, you’re still not a fintech.)
• High-net-worth investors: That 30% top savings rate taps your shoulder at €300k+ incomes. Tax deferral may become your new best friend.
• Non-EU property buyers: Keep watching the “up to 100%” tax proposal. This is the policy equivalent of a weather warning: it may drift, split, or hit land.
• Heirs in certain regions: Inheritance tax often now says, “I’m off to Ibiza.” Confirm local rules, then celebrate responsibly.

Practical checklist (so you can look clever on Monday)

1. If you bank or broker in Spain: Model the 1–7% bank tax impact on your P&L and pricing.
2. If your savings income can top €300k: Re-evaluate wrappers, timing of withdrawals, and asset location.
3. Thinking of buying in Spain as a non-EU resident: Pause, get advice, and track the 100% property tax proposal closely.
4. Inheritance planning: Re-run scenarios by region—reliefs can be massive, but rules differ.
5. Budgeting households: Expect higher baseline costs from VAT/fuel/electricity resets; shop around, switch tariffs, and stop treating olive oil like cologne.

Conclusion

Spain’s 2025 plan blends EU-approved fiscal discipline with domestic social aims—and a dash of headline-grabbing housing policy.

For investors and families alike, the theme is simple: location matters, timing matters, and reading the footnotes definitely matters.