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EXPLAINED: The changes to Spain’s annual income tax return in 2021

EXPLAINED: The changes to Spain's annual income tax return in 2021
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Spain’s annual income tax declaration for 2020 starts soon. Because of the pandemic, however, there are several changes you need to know about filing in 2021.

Some of the main things that will affect this year’s Declaración de la Renta (tax return) – which starts on April 7th and ends on June 30th – involve those who have been receiving or who are currently on ERTE (temporary unemployment), those who are receiving the minimum vital income, and modifications in the contributions to pension plans.

How those on/have been on ERTE are affected?

Many people were on ERTE benefits during 2020 because of the lockdowns and closures, so it’s important to understand how the taxation of these benefits will affect your yearly income result.

One of the first things to note is that all those who received ERTE have been paid by more than one source. If you are paid by more than one source, the mandatory minimum to file a tax return falls from €22,000 per year when you have a single-payer, to €14,000 if the amount collected from a second source is more than €1,500.

The second point to know is about the taxation on benefits received, as it is likely that SEPE – the State Public Employment Service has not applied withholding on ERTE benefits.

Another new thing to be aware of is how ERTE has affected other certain benefits. For example, all those who have been paid ERTE will have been considered as unemployed, meaning that they will not be entitled to the maternity deduction or childcare assistance like they may have been in the past.

How are those on minimum vital income affected?

The minimum vital income was approved last May and anyone receiving it will also have certain tax implications. Article 33 of the Royal Decree states that anyone who receives this benefit must fill out the annual tax declaration. This means that some people who were not obliged to fill it out before, must now do so. 

How real estate capital is affected?

The real estate capital section of the annual return will now be easier to fill out because it will be presented in a simpler way. You will also be able to transfer returns on real estate capital from the previous year’s tax declaration to this year’s return.

Importing data from personal income tax books

Also new for 2021, is the ability for those taxpayers who have to keep an income tax record book to able to import the data to their income tax return, to make it easier to fill out. This should help a lot of people save time. One thing you have to be aware of though is that if you want to import it, the format of your personal income tax book may have to be adapted so that it can be imported by the services of the Tax Agency.

New additions on general income and savings income

This year, there will be new sections on general income and savings income. While last year, there were five sections, this year, another will be added for taxable bases that exceed €300,000. A rate of 24.50 percent will be applied to this.

New changes will also be made regarding income from savings. This is related to the collection of life insurance, interest on savings accounts and deposits, and the sale of shares or donation of goods. In this fiscal year, all those who exceed €200,000 will pay 26 percent tax.

Changes in contributions to pension plans

The last thing that changes in 2021 is do to with pension plans. Personal contributions to personal pension plans may not exceed €2,000, and those contributions from companies, may not exceed €8,000. The contributions that a spouse can make (up to €1,000 per year) or those from private long-term insurance (up to €2,000) have also been reduced.

READ ALSO: Do I really need to declare foreign assets to Spanish taxman by March 31st?


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