Solutions to mitigate the impact of the tax reform

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The Government plans to establish tax measures as from January 2011 which may result in an increase in tax pressure. The main tax measures affecting personal income tax that will probably be approved for 2011 are as follows:

  • Increase in tax rates.
  • Limitations on the 40% reduction for income generated over a period of more than two years (irregular income).
  • Share options.
  • Limitations on the deduction for the acquisition of a habitual dwelling.
  • Modification of the reduction for rental income.
  • Elimination of the deduction for the birth or adoption of a child.
  • Modification of the refund regime in respect of contributions in open-ended investment companies (SICAVs).

Several of these measures will especially affect the remuneration of directors of your company.

The efficient management of this new tax scenario could be a key part of the HR policy and director talent management.