Tips on how to pay less personal income tax based on current legislation in Spain
Paying less Personal Income Tax through tax tips is possible, however, in order to achieve this it is necessary to have an in-depth knowledge of the current tax framework in our country. Here are some tips on how to pay less personal income tax on your tax return.
What is personal income tax (IRPF in Spain)
If you would like to find out more about Personal Income Tax, you can consult this post in which we provide you with all the information you need, in any case, we are going to summarise the nature of this tax.
Personal Income Tax, commonly known as IRPF, is a tax on the income and gains obtained by individuals resident in Spain. It is one of the most relevant and fundamental taxes in the Spanish tax system. Its main purpose is to finance public expenditure and services, such as education, health and other social benefits.
IRPF is applied on a progressive basis, which means that people with higher incomes pay a higher percentage of tax on their income than those with lower incomes. The tax is calculated annually and is declared by filing the income tax return.
Income subject to personal income tax may include wages, pensions, rental income, capital gains, bank interest, dividends and other types of income. Each source of income may be subject to a specific withholding rate.
Taxpayers must file their Income Tax Return annually to determine whether they have paid the correct amount of tax throughout the year or whether they should receive a refund or make an additional payment. This Declaration allows the amount of tax due to be adjusted according to each taxpayer’s personal and family circumstances.
Personal income tax (IRPF) is a fundamental tax in Spain that taxes the income and earnings of individuals and is used to finance essential public services. Its progressive nature seeks to ensure that taxpayers with higher incomes contribute a greater proportion of their resources to support the state and public services.
How to pay less personal income tax in Spain
Take advantage of tax deductions: The IRPF allows a series of deductions that can help you reduce your taxable income. These can include deductions for permanent residence, large family, disability, investment in companies, and more. Be sure to check all applicable deductions and meet the requirements to benefit from them.
Contribute to your pension plan: Contributions to pension plans reduce your taxable income. Contributing to your pension plan will not only help you save for the future, it will also provide an immediate tax benefit.
Invest in savings products: Some savings products may offer tax advantages.Consult a financial advisor to determine which options are right for you.
Plan to sell property: If you own real estate, consider when is the best time to sell it and take advantage of the home reinvestment exemption, or the main residence allowance on capital gains.Deductions for working from home: If you work from home, you may be able to deduct certain work-related expenses, such as using part of your home as an office.
Training and education expenses: Training and education expenses related to your job may be deductible. Be sure to keep receipts and documents to support these expenses.
Optimise joint filing: If you are married, evaluate whether filing a joint or separate return is more beneficial for your particular situation.
Review your withholdings: Make sure your withholding is appropriate to avoid surprises on your tax return. You can adjust your withholding by filing a withholding form at your workplace.
Donate to charity: Donations to charities can provide tax deductions. Make sure the organisation is registered and complies with legal requirements.
Optimise your deductible expenses: Keep track of your deductible expenses, such as medical, educational, housing and other work-related expenses. Be sure to claim all deductions to which you are entitled.
Consult a tax advisor: A tax professional can help you make the most of tax reduction opportunities and ensure you comply with all tax regulations.
Long-term tax planning: Tax planning should not be limited to the annual tax return. Consider long-term tax strategies that suit your financial and personal goals.
Paying less personal income tax in Spain is possible, as long as the legal conditions for doing so are met, otherwise the holder of the declaration faces serious penalties. At Asesoría Orihuela Costa we advise you whenever you need it, so that you can reduce your tax payments in accordance with current legislation.
