(SPAIN) — The Partido Popular (PP) filed a non-legislative motion in Congress on June 29, 2026, proposing to return €3.2 billion to taxpayers through IRPF adjustments. The announcement lands one day before Spain’s June 30, 2026 deadline for filing 2025 IRPF returns.

PP national spokesperson Borja Sémper presented the package Monday. He argued that the Spanish government has not adjusted IRPF brackets for inflation, allowing price increases to push workers into higher tax rates without real income gains.

Sémper called the proposal a way to return money taken “through the back door” by inflation. The motion has three components.

IRPF bracket adjustments totaling €3.2 billion would reverse fiscal drag caused by fixed brackets during inflationary years. Self-employed workers with annual turnover below €85,000 would pay zero VAT.

Reduced VAT rates on electricity, gas, and fuels would extend for three months on a renewable basis, tied to the ongoing Iran crisis and its effect on energy markets.

Inflation has eroded purchasing power across Spanish households since 2022. Without automatic bracket indexation, nominal salary increases trigger higher IRPF rates even when real wages stagnate or decline.

The PP motion targets that gap directly, proposing to return revenue the government collected because brackets stayed fixed.

The zero-VAT measure affects freelancers and small business owners below the €85,000 turnover threshold. These workers currently charge and remit VAT on services rendered.

Eliminating that obligation simplifies compliance and reduces effective tax rates for a segment of Spain’s self-employed workforce that faces disproportionate administrative burdens relative to larger firms.

The energy VAT extension addresses costs tied to the Iran crisis and broader supply disruptions. The cuts, originally introduced as temporary relief during earlier price spikes, are scheduled to expire.

The PP proposes renewing them quarterly, with continuation tied to market conditions and supply stability assessments. US citizens and green card holders residing in Spain face overlapping filing obligations.

US persons must file Form 1040 reporting worldwide income regardless of foreign residency. Spanish IRPF paid may qualify as a Foreign Tax Credit on Form 1116.

Alternatively, earned income may be excluded under the Foreign Earned Income Exclusion via Form 2555, subject to annual limits outlined in IRS Publication 54.

The US-Spain tax treaty, in force since 2019, establishes residency tie-breaker rules and double taxation relief. Treaty provisions do not override US filing requirements for citizens.

They determine which country holds primary taxing rights on specific income types, including dividends, interest, and employment income. Spanish financial accounts held by US persons trigger separate reporting requirements.

Accounts exceeding $10,000 aggregate at any point during the year require FBAR filing through FinCEN Form 114.

The FBAR deadline is April 15, with an automatic extension to October 15. Form 8938 applies when foreign assets exceed $50,000 (single, year-end) or $75,000 (single, any time during the year).

The non-legislative motion carries no binding force. It requires congressional debate and a vote in the Congreso de los Diputados.

If approved, implementing legislation would follow. An effective date could apply to tax year 2026 (filed in 2027) or retroactively to tax year 2025, depending on legislative language.

The June 30 deadline for 2025 IRPF returns applies to Spanish tax residents, including expatriates meeting Spain’s 183-day residency rule.

Non-residents with Spanish-source income file Form 210 by the same date. Late filing triggers surcharges starting at 1% of tax due, plus interest.

📅 Deadline Alert: June 30, 2026 is the final day to file 2025 IRPF returns in Spain. Late filing incurs surcharges starting at 1% plus accrued interest.

⚠️ Warning: US persons with Spanish accounts exceeding $10,000 must file FBAR. The April 15 deadline has passed, but the automatic October 15, 2026 extension remains available.

The proposal intersects with housing costs through energy taxation. Reduced VAT on electricity and gas lowers household utility expenses, a component of monthly housing costs that has risen sharply since 2022.

The self-employed VAT elimination could also benefit independent contractors in construction, maintenance, and property management whose annual turnover falls below €85,000.

Any IRPF reduction affects Foreign Tax Credit calculations for dual filers. Lower Spanish tax liability means a smaller credit available against US tax owed.

Taxpayers claiming the credit should monitor legislative progress and adjust estimated payments if the proposal advances through Congress. Review Spanish withholding and US estimated tax payments now.

If the PP motion passes and bracket changes take effect mid-year, adjust withholding to avoid underpayment penalties. Track the congressional schedule through the Congreso de los Diputados calendar.

Consult a cross-border tax advisor before the 2026 IRPF filing window opens in April 2027.

⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.