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Date Published: 29/12/2021

ARCHIVED - Ways to pay less tax on your income statement in Spain

ARCHIVED ARTICLE

Personal income tax will be filed in Spain between April and June next year

<span style='color:#780948'>ARCHIVED</span> - Ways to pay less tax on your income statement in Spain

There are still a few months before personal income tax will need to be filed in Spain for the year 2021, but money experts have already come up with a few tips and tricks that could lead to substantial savings for taxpayers in the next statement. The annual payment will be due between April and June of 2022, but there are still several ways to save a euro or two before the ball drops on this year.

Pension plan contributions

In 2021, the maximum contribution a taxpayer can deduct is 2,000 euros in total, provided that this amount doesn’t exceed 30% of the overall economic income of the year.

The contributions made to pension plans reduce the taxable income of personal income tax, so in an example where a taxpayer has earned 30,000 euros in the year, assuming they have paid the maximum contribution of 2,000 euros, the amount payable will only be charged on the remaining 28,000 rather than the full income.

Given that the tax rate is 30%, the savings in this case would amount to 600 euros, and the more you earn, the more you save.

Up until last year, the maximum pension contribution allowed was 8,000 euros and this is expected to be reduced even further in 2022 to just 1,500 euros, so now is a good time to max out the annual plan.

Invest in start-up businesses

The government allows 30% to be deducted from the amount invested in shares in newly created companies, up to a maximum of 60,000 euros.

Offset losses against gains

If you invest in the stock market, mutual funds or cryptocurrencies, the Treasury allows you to offset the losses against the gains that have been amassed during the year.

It is therefore a good idea to sell at the end of the year and thus save on the 19-26% tax rate applied to the net amount of capital gains obtained during the year.

Work abroad

People who carry out work for a non-Spanish company or a business abroad may be exempt up to 60,100 euros per year. The exempted income is of course dependent on the number of days the worker has been posted abroad.

Liquidate part of mortgage payment

For those who purchased a home in Spain before January 1 2013, up to 15% of what has been paid on the mortgage during 2021 can be deducted, up to a maximum of 9,040 euros.

Those who have made lower mortgage repayments during the year can make the most of this tax break by amortising part of the loan on a habitual residence.

Sell a habitual residence

In the case of having sold the main residence this year, it will be possible to avoid paying tax on the capital gain (tax rate between 19-26%) if the amount obtained is reinvested in whole or in part, within a period of two years, in another home that will be considered a main residence.

Deductions for donations

Donations made to non-profit organizations allow a deduction of up to 80% on the first 150 euros. The rest of the donation may be deducted by 35%, unless donations of the same amount have been made during the last two years to the same organisation, in which case the deduction amount will increase to 40%.

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