How to reduce the payment of taxes in Spain?

Reducing the payment of taxes in Spain is something that all those obliged to pay taxes want. Therefore, in this article we are going to see some very interesting options.

Main taxes paid in Spain

Taxes are mainly paid:

Personal Income Tax (IRPF). It is the most important and taxes the income that people earn.
Non-Resident Income Tax (IRNR). It is similar to personal income tax but for people not resident in Spain.
Wealth tax. It is applied to the wealth that citizens possess.
Corporate Tax. It is the main tax of companies.
Inheritance and Donation Tax. It is related to inheritances and donations received.
Value Added Tax (VAT). It taxes consumption and varies depending on the value of the products purchased.

How to reduce the payment of taxes in Spain

Although taxation in Spain can be extensive, there are some tricks to reduce the payment of taxes.

Update the family situation

The personal and family situation in each case significantly influences the Income Tax.

In this way, a family with children will have more deductions and tax benefits than one that does not have them. A person who has a dependent family member may also have the same tax conditions.

Being married, divorced or widowed also influences.

Therefore, including all updated information on your family situation can help reduce the payment of taxes in Spain.

Have a part of the salary in kind

One of the things that makes you pay more taxes is the income you receive and the wealth you accumulate.

Therefore, collecting a part of the salary in another way, in food vouchers or daycare checks for example, will be exempt from paying personal income tax.

Therefore, collecting in kind reduces the payment of taxes.

Amortize the mortgage

One way to alleviate tax burdens is to have a mortgage, since you can apply the tax deduction for purchasing a primary residence. This is the case if you formalized it before 2013.

But, in addition, if you make a repayment before the end of the year you can deduct 15% of what you paid, with a maximum of 9,040 euros.

Regional deductions

Depending on the Autonomous Community in which taxes are paid, they may vary substantially. Therefore, it is essential to check the regional deductions that can be applied to taxes and how each of them is taxed.

Contributions to a pension plan

Investments are a way of moving assets, of investing income. Therefore, if you make contributions to pension plans you can deduct it from your taxes.

Sell your habitual residence

The sale of your habitual home, if it is to acquire another home, will be exempt from paying taxes.

On the other hand, if you are 65 years old or older, the gain you will obtain from the transfer of the deeds and sale of the house is tax-free.

Donations

Donations to NGOs, foundations or non-profit entities can be deducted by 80% on the first 150 euros and 35% on anything that exceeds that amount. That percentage rises to 40% if it is the third consecutive year that you donate to the same entity, as long as each donation has been equal to or greater than the previous year.

Rental income deductions

Some expenses related to home ownership can also be deducted in the income tax return. The most common are insurance and IBI, as well as loan interest.

Home renovations

When renovations are going to be carried out that improve the energy efficiency of the home, between 20% and 60% of the price that the work cost you may be deducted.

The deductions vary depending on the type of work:

If you are going to carry out works that reduce non-renewable energy consumption by 30% or improve the energy rating by reaching the letters “A” or “B”, it is possible to deduct up to 40% of the cost of the work, with a maximum of 7,500 euros.
If you are going to carry out works that reduce the demand for heating and cooling by 7%, you can deduct up to 20% of the cost of the work, up to a maximum of 5,000 euros.
If the work has the objective of reducing the consumption of non-renewable primary energy by 30% or improving the rating by reaching the letters “A” or “B” in buildings with predominantly residential use, 20% of the cost of the work can be deducted. up to a maximum of 15,000 euros.

Do not sell shares

When selling some shares that you own, it may happen that you exceed the maximum income limit for which you are not required to file your income tax return.

That is why it is important to assess whether it is better to receive the money from the sale and pay the corresponding personal income tax or wait until the following year and not have the obligation to declare.

To know how to reduce the payment of taxes in Spain, it is essential to know the main taxes that apply, among which the IRPF stands out. Salary in kind and mortgage amortization are the most common applicable deductions.

Further information

This article is part of our service Taxes in Spain for foreigners. Visit this section where you will find all the useful information on this topic, including a complete guide Taxes in Spain for non-residents and foreigners.

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