Grants and Aids: Are they taxed or exempt from income tax?

In general, subsidies and aid given by public administrations are taxable.

However, if the resolution specifically states that they are exempt, they would not be taxed.

Therefore, we find that this has to be reviewed on a case-by-case basis because there are numerous exceptions.

When a grant or aid is taxed, it is taken into account when calculating the taxable base for Personal Income Tax (IRPF ) or Corporation Tax (IS ).

It is therefore important to bear this in mind in order to know whether to apply for it or receive it.

This is where the accounting and financial departments of the company have to decide, hence the need for quality advice.

However, as mentioned above, there are some exceptions where tax is not levied. These are mainly for individuals, not companies, and include the following:

1. Academic and sports scholarships

Scholarships to study or to improve sporting performance are exempt from taxation. Not surprisingly, it is considered to be a medium and long-term investment.

2. Specific aids for the chronically ill

Some specific aids for the chronically ill are not subject to personal income tax. This is the case, for example, of aid for HIV patients.

In some other cases, the State may also introduce benefits for other groups of patients who are not taxed.

3. Indemnities for civil liability

Compensation for civil liability, when paid by the state, is also not taxable.

However, they must have caused personal injury to the person receiving the compensation.

4. Capitalised unemployment benefits

It is now possible to capitalise the entire unemployment benefit in a lump sum. Generally, this is an option that is sought for opening or acquiring a new business.

In this case, the charge will be tax exempt.

5. Paternity or maternity benefits

Paternity or maternity benefits are other benefits that are not taxable for personal income tax purposes.

It is considered to be a support so that this circumstance does not unnecessarily harm the parents.

Consequently, it is a tax-exempt possibility.

6. Aid for natural disasters

Natural disaster relief is designed as a one-off repair in the event of a natural disaster.

It is often for the restoration of houses or for maintenance for a few days or weeks.

For this reason, they are tax exempt. However, a well-founded proof of eligibility is required.

7. Permanent incapacity or severe disability

Finally, permanent incapacity or severe disability, due to illness or accidents at work, are not taxable.

They are not retirement pensions as such and do not operate according to the same logic, even if they are paid by the social security system.