In a significant fiscal development, the Spanish government, alongside nationalist parties, has agreed to extend the banking tax for three more years while introducing new tax hikes on tobacco, hydrocarbons, and capital income.

This decision comes after intense negotiations, with the government opting to drop the extraordinary tax on large energy companies due to pressure from key political allies, PNV and Junts.

These changes are part of amendments to a European directive mandating a minimum tax on multinationals.

Despite the agreement, the minority government partner, Sumar, along with Bildu and ERC, continues to push for the retention of both sector-specific taxes.

The deadline for amendments to the directive has now passed, marking a crucial step in Spain's fiscal reform efforts.

The new banking tax will range from 1% to 6% based on taxable income, effective from January 2024, while the tax on capital income will see a slight increase for high earners.