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Spain Slashes Labor Taxes To Create Jobs

by Ulrika Lomas, Tax-News.com, Brussels

03 March 2014


Spain's Prime Minister Mariano Rajoy has announced plans to significantly lower social security contributions for employers who recruit permanent members of staff.

During his State of the Nation address, Prime Minister Rajoy said that an upwards revision of the growth forecast for this year and next will enable the Government to lower employers' contributions to a flat rate of EUR100 (USD137) a month for companies that create jobs. The favorable flat rate is to apply for the first two years, on condition that the new recruit is kept on the payroll system for a period of at least three years. The measure aims to address the issue of high unemployment in Spain. Prime Minister Rajoy said that the move will lower social security contributions for employers by up to 75 percent.

Furthermore, Rajoy said that the Government plans to raise the individual income tax (IRPF) threshold to EUR12,000 from 2015, and confirmed plans to increase family tax breaks. The tax reform is expected to benefit around 12 million taxpayers.

Spain's Confederation of Business Organizations (CEOE) welcomed as positive plans to introduce a flat rate social security contribution, emphasizing that the measure will dramatically lower recruitment costs for businesses. The CEOE also welcomed plans to raise the income tax exemption threshold.

Economic growth in Spain has been revised upwards to 1 percent of gross domestic product (GDP) in 2014 and to 1.5 percent of GDP in 2015. The Government had forecast growth of 0.7 percent for this year and 0.9 percent for next.

TAGS: tax | business | tax thresholds | payroll | unemployment | tax rates | social security | Spain | tax breaks | tax reform | individual income tax

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