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PERSONAL INCOME TAX 2023

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Are you in Spain for more than six months (183 days) of the calendar year or are your main economic interests in Spain? If the answer is yes, then you are considered a tax resident in Spain.

As a tax resident, you will be obliged to pay Spanish tax on your worldwide income and assets and will be required to file a Spanish income tax return

Your income tax return, now over videoconference

Do you need to file your tax return, but simply cannot find the time to come to one of our offices? At Pellicer & Heredia you can now file your tax return via a simple videoconference. In a matter of seconds you will be connected and one of our experts will attend to you, reviewing your documents in the same way as you would in a face-to-face meeting.

Once your appointment is confirmed, you will receive an email with the date and time, along with a link to access the conference. Please note that registration is not required. When it is time for your appointment, simply click on the link provided and you will be connected instantly.

Is it compulsory to file a tax return in Spain?

There are exceptions, which we highlight below:

22,000 euros of earned income and pensions, including income from abroad.

This limit is reduced to 15,000 euros in the following circumstances:

  • The income has not been taxed at source (Spain).
  • The income comes from more than one source (e.g. two jobs or two pensions, or one of each). If the other sources add up to EUR 1,500 or less, you can still benefit from the EUR 22,000 exemption.

However, the declaration becomes compulsory in certain circumstances, regardless of how low your income is, for example:

  • If you are entitled to double taxation
  • If you are entitled to a refund
  • If you have made pension contributions
  • If you claim deductions for the purchase of your main residence.
  • If you have capital gains or income above certain limits.

Types of income

Here are 5 types of income:

  • Earned income (employment, pensions).
  • Investment income (interest, dividends).
  • Income from real estate (rentals, second homes).
  • Income from economic activities.
  • Capital gains (lottery, gambling, sale of assets such as housing, shares, etc.)

Personal allowance 2023 (Valencian Community)

  • Minimum: 6,105 euros
  • Over 65s: 7,370 euros
  • Over 75 years of age: 7,645 euros.

In addition, income from work and pensions have a minimum exemption of 2,000 euros.

There is another reduction of 6,498 euros when income is less than 14,047.50 euros, and it disappears progressively until income exceeds 19,747.50 euros.

Spain is divided into 17 autonomous communities, and taxes are shared between the state and regional governments, with each autonomous community deciding its own tax rates and obligations, so the amount of income tax you pay depends on where you live. Below are the state brackets and the rates applied to the general tax base:

What's new in 2023

  • Reduction of the regional personal income tax rate: The regional personal income tax rate is reduced from 24% to 23% for the first 30,000 euros of income.
  • Deduction for health and assistance expenses: A deduction of 30% is established for amounts paid for optical, dental and gym expenses, up to 150 euros per person.
  • Deduction for expenses associated with sports: 20% of the fees paid in gyms, sports schools and sports federations can be deducted, up to 100 euros per person.

General Taxable Base 2023 (coincides with the autonomous community of Valencia)

  • Up to 12,450: 19%.
  • Rest 7,750: 24%.
  • Rest 15,000: 30%.
  • Rest 24,800: 37%.
  • Rest 240,000: 45%.
  • From 300,000 upwards 47%.

Savings income includes income from interest, dividends, life insurance, annuities acquired (not annuities acquired with pension funds) and capital gains from the sale or transfer of assets (not real estate).

Tax saving amount 2023

  • Up to 6,000: 19%.
  • Rest 44,000: 21%.
  • Rest 150,000: 23%.
  • Rest 100,000: 27%.
  • Over 300,000: 28%.

Most important deductions

  • 50% of the amounts invested in newly created companies up to a maximum deduction of 100,000 euros provided that no more than 40% of the company is owned (state deduction).
  • Deduction for double taxation (state deduction)
  • 10% of the amounts donated to legally recognised foundations (state deduction)
  • For large families: in general (3 or more children) 1,200 euros (state deduction); and probably the region includes an additional deduction as in the case of the Valencian Community.
  • For families with multiple children (5 or more): 2,400 euros (state deduction).
  • For renting a main residence, on the amounts paid during the tax period (deduction for the Valencian Community):
  • 20%, with a limit of 800 euros.
  • 25%, up to a limit of 950 euros if the tenant is under 35 years of age.
  • 40% of the amount of the amounts invested in electricity self-consumption installations in the main residence with a maximum deduction of 8,800 euros (Community of Valencia deduction).
  • With effect from 30th June 2023, a new state deduction for the purchase of electric vehicles is approved in the 58th additional provision of the Personal Income Tax Law, introduced by Royal Decree-Law 5/2023 of 28 June (BOE of 29 June) 2023. One of the following alternatives is available:

 

– If the vehicle is purchased between 30th June 2023 and 31st December 2024, the deduction can be taken in the tax period in which the vehicle is registered.

– If amounts are paid between 30th June 2023 and 31st December 2024 on account of the future purchase of the vehicle, amounting to at least 25% of the acquisition value, the tax credit can be taken in the tax period in which this amount is paid, the remainder must be guaranteed and the vehicle must be purchased before the end of the second tax period immediately following that in which the payment of this amount was made, i.e. in 2025 (if the 25% payment was made in 2023) or 2026 (if it was made in 2024).

 

In both cases, the basis for the deduction is made up of the purchase price of the vehicle, including the expenses and taxes inherent to the purchase, and does not include amounts subsidised or to be subsidised through a public aid programme.

The base of the deduction then calculated may not exceed 20,000 euros.

  • Deduction for energy efficiency improvement works on homes
  • The deduction for work to reduce heating and cooling demand may be applied to amounts paid for work carried out up to 31sts December 2024 on the main residence or any other property owned by the taxpayer that is rented for use as a home at that time or in the expectation of being rented, provided that, in the latter case, the property is rented before 31st December 2025.
  • The deduction for works to improve the consumption of non-renewable primary energy can be applied to the amounts paid for works carried out up to 31st December 2024 on the main residence or any other property owned by the taxpayer that is rented for use as the main residence at that time or in the expectation of rental, provided that, in the latter case, the property is rented before 31st December 2025.
  • The deduction for work carried out on predominantly residential buildings may be applied for the amounts paid for such work up to 31st December 2025.

This last deduction will be applied in the tax periods 2021, 2022, 2023, 2024 and 2025 in relation to the amounts paid in each of them.

 

For more information: please do not hesitate to contact our multidisciplinary professional firm specialised in taxation. At Pellicer & Heredia we can analyse your tax situation on a personalised basis, as well as carry out a tax planning study in accordance with your needs.

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