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This blog is intended to be helpful to English-speaking foreign residents in Spain by explaining "How to ... " do certain things. "The Crazy Guy" has lived in Spain full time since 2008. A fluent Spanish-speaker he reckons he knows his way round the bureaucracy, the indifference and sometimes downright rudeness of "funcionarios".

HOW TO ..... pay less tax in Spain?
Friday, November 19, 2021 @ 9:29 AM

If you act fast you can save a lot of money before the end of the year. The implementation of some basic tips will help you cut your personal income tax for the next income tax declaration in 2022.

The Organisation of Consumers and Users (OCU) reminds us that we still have time to reduce our personal income tax bill for the next tax declaration in 2022. If you want to pay fewer taxes, the OCU encourages us to implement a series of guidelines before 31 December 2021.

“At OCU we want to help you by reminding you of our 10 tax tricks, tips that, always within the law, will allow you to reduce your liability to the Spanish Inland Revenue (Agencia Tributaria or Hacienda).”

1. Take advantage of regional deductions
Did you know that it is possible that you can offset your children’s daycare, educational expenses, public transport travel ticket, domestic help, the installation of water or energy-saving devices, rent, etc.? To confirm this, the OCU advises as a first step to clarify first of all the tax deductions to which you are entitled, which vary depending on each autonomous community, and put them into practice.

2. Communicate changes in your family circumstances
Inform your employer of any change in your family situation: if a child is born, if you divorce, if there is a disability … The amount of personal income tax you are liable for depends, among other things, on family circumstances.

3. Exchange salary in cash for salary in kind
Obtaining part of your salary as wages in kind is a good way to save taxes: some benefits such as health insurance for the employee, his spouse and his children; food vouchers; season tickets, are exempt from income tax.

4. Review your expenses like a professional
If you pay trades union subscriptions, professional college fees or if you have had a labour lawsuit and have paid fees to the lawyer and attorney, those expenses may be deducted from your overall income.

5. Make donations
Donations may be deducted, and if you always make them to the same entities, more so. If you make donations to NGOs, foundations and non-profit organisations, you may deduct 80% on the first 150 euros, and 35% on what exceeds that amount (that percentage rises to 40% if it is the third year of you donating to the same entity and each donation has been equal to or greater than the previous one). So, it is time, then, to start supporting a charity.

6. Pay off your mortgage
If you have the right to take advantage of the tax deduction for the purchase of a habitual residence, you should pay off your mortgage before the end of the year, according to the OCU. “If you bought your house before 2013, 15% of what you paid to buy the house is deducted, up to a maximum of 9,040 euros, or 18,080 if you pay it with your spouse and you declare separately. It is worthwhile to pay off your mortgage in advance up to an amount that reaches that limit and thus take full advantage of the deduction,” they argue.

7. Wait until you turn 65 to sell your house
If you are close to reaching 65 and you are considering selling your habitual home, it makes sense to wait until you turn 65, because any profit you make from the sale will be tax-free.

8. If you are a landlord, take advantage
If you are the owner of a rental property, you can deduct from your rental income expenses such as: IBI, advertisements, agency, insurance, community … and also repair and maintenance expenses and the interest on loans for the purchase or improvement of the property (up to a certain limit).

9. Save on pension plan
Contributions of up to 8,000 euros to a pension plan cut the personal income tax bill, but be careful: it is very important to choose a good plan, otherwise the expenses and low profitability can turn it into a bad investment.

10. Compensation for profit and loss
If you are an investor, if you have assets to sell … remember that profits outweigh losses (and vice versa). Act accordingly.

And remember…
It is important to keep all supporting documents for deductible expenses (receipts for payments, courses, donations, etc) in order to avoid possible problems.

 

Acknowledgments to the Organisation of Consumers and Users (OCU)



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