Nine mistakes to avoid when filing your Spanish tax return
Whether you've completed Spain’s annual 'declaración de la renta' (income tax return) before or this is your first time, there are several key points and common blunders you need to keep in mind before doing so.
Spain's annual tax campaign known as 'la declaración de la renta' this year began on April 11th and you will have until June 30th to submit it. This year you will fill out your details for your earnings in 2022.
Even if you're an employee, rather than self-employed or autónomo and your employer automatically deducts your tax from your paycheck each month, there are lots of points you need to keep in mind when filling it out or even when getting a gestor or accountant to help you.
The tax authorities will provide an estimate and an initial draft of your declaration and include how much they believe you should pay, but this isn't always accurate and won't include all the information, so it's important to keep these points in mind.
Find out whether you’re required to fill it out
Keep in mind that not everyone must automatically fill out the income tax form. You will have to complete it if:
- You are employed and have an annual income over €22,000 from a single employer
- You have earned over €15,000 from multiple employers, as long as the amount from the second or third employer exceeds €1,500 per year.
- You are self-employed or have your own business
- Your income from yearly dividends, interest and capital gains exceeds €1,600
- You receive rental income over €1,000 per year
- It is the first year that you are filing a tax return in Spain
READ ALSO - La Renta: The important income tax deadlines in Spain in 2023
Check the draft
Before submitting the form, you will typically see a draft of what the tax authorities believe your personal income tax will be, according to the data they have. Of course, this may not be completely correct or complete, so it’s important to check each section carefully and not simply submit the draft calculation.
Check your tax address
If you moved house during the past year and did not notify the Treasury, be careful when exporting your data into the tax form. It’s likely that the old address will appear. Even though this is a small mistake, it has its consequences and you may incur a fine.
Review your family status
Did you have a child or get married since your last tax return? You must explicitly indicate the change in your family and personal situation in the dedicated section. For example, the difference between including or not including your children in the income statement is huge.
Remember though that the Treasury takes into account your situation as of December 31st of the previous year. This means that if you became a parent in January of this year, you must wait for the next Income Tax return to apply your deduction. The same applies to marriages and divorces. This is one of the most common mistakes and can cost you if you get it wrong.
READ ALSO: What's new for Spain's 'La Renta' tax return in 2023?
Home rental deductions
It’s important to keep in mind that only rental contracts signed before January 1st, 2015 are entitled to a deduction. The Treasury will also not automatically include this information in the initial draft, so you will need to add it. If you meet this requirement, you can deduct 10.05 percent of the amounts paid in the tax period for the rental of your home. Don't forget to check if your region includes any type of additional deduction to the rent before confirming.
Deductions for maternity, incapacity or for a large family
If you are entitled to any deductions because you are a mother with a child under three years old, are on incapacity benefit or have a large family, then you should know that the tax authorities will not automatically include this information in the initial calculation, so you’ll need to add it all yourself. For example, mothers of children under three years of age are entitled to a maternity deduction of €1,200 that they can collect in advance at a rate of €100 per month. There are also deductions for childcare expenses for working mothers.
READ ALSO: Who in Spain will save €1,000 in 2023 thanks to income tax changes?
Be aware of any regional deductions
You may be entitled to certain deductions, depending on where you live live in Spain. In order to pay less income taxes, you will almost always have to fill in the data yourself. These could include deductions for school expenses, buying a house or investing in newly created companies.
Remember to include interest, dividends and life insurance
Other amounts that will not automatically be generated and included in the draft version of your calculation are the bank interest you have earned from savings, any dividends you are paid from companies or life insurance payouts. You must include all of these in order to get an accurate calculation and ensure you're not withholding any important financial information.
READ ALSO: The tax changes in Spain in 2023 that you need to know about
Information for landlords
If you are a landlord and rent out a property, you will have to pay taxes for the profit you obtain and enter this data manually as it will not have been calculated for you. Remember that by including the rent you may be able to subtract expenses such as your IBI bill and your community bills for cleaning and upkeep of the building. In addition, you may be able to get a general reduction of 60 percent on the resulting amount. In the end, you will pay much less taxes than you think for renting your home in Spain. Be aware, this is not the case for vacation rentals, only if you're renting out long term.
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Spain's annual tax campaign known as 'la declaración de la renta' this year began on April 11th and you will have until June 30th to submit it. This year you will fill out your details for your earnings in 2022.
Even if you're an employee, rather than self-employed or autónomo and your employer automatically deducts your tax from your paycheck each month, there are lots of points you need to keep in mind when filling it out or even when getting a gestor or accountant to help you.
The tax authorities will provide an estimate and an initial draft of your declaration and include how much they believe you should pay, but this isn't always accurate and won't include all the information, so it's important to keep these points in mind.
Find out whether you’re required to fill it out
Keep in mind that not everyone must automatically fill out the income tax form. You will have to complete it if:
- You are employed and have an annual income over €22,000 from a single employer
- You have earned over €15,000 from multiple employers, as long as the amount from the second or third employer exceeds €1,500 per year.
- You are self-employed or have your own business
- Your income from yearly dividends, interest and capital gains exceeds €1,600
- You receive rental income over €1,000 per year
- It is the first year that you are filing a tax return in Spain
READ ALSO - La Renta: The important income tax deadlines in Spain in 2023
Check the draft
Before submitting the form, you will typically see a draft of what the tax authorities believe your personal income tax will be, according to the data they have. Of course, this may not be completely correct or complete, so it’s important to check each section carefully and not simply submit the draft calculation.
Check your tax address
If you moved house during the past year and did not notify the Treasury, be careful when exporting your data into the tax form. It’s likely that the old address will appear. Even though this is a small mistake, it has its consequences and you may incur a fine.
Review your family status
Did you have a child or get married since your last tax return? You must explicitly indicate the change in your family and personal situation in the dedicated section. For example, the difference between including or not including your children in the income statement is huge.
Remember though that the Treasury takes into account your situation as of December 31st of the previous year. This means that if you became a parent in January of this year, you must wait for the next Income Tax return to apply your deduction. The same applies to marriages and divorces. This is one of the most common mistakes and can cost you if you get it wrong.
READ ALSO: What's new for Spain's 'La Renta' tax return in 2023?
Home rental deductions
It’s important to keep in mind that only rental contracts signed before January 1st, 2015 are entitled to a deduction. The Treasury will also not automatically include this information in the initial draft, so you will need to add it. If you meet this requirement, you can deduct 10.05 percent of the amounts paid in the tax period for the rental of your home. Don't forget to check if your region includes any type of additional deduction to the rent before confirming.
Deductions for maternity, incapacity or for a large family
If you are entitled to any deductions because you are a mother with a child under three years old, are on incapacity benefit or have a large family, then you should know that the tax authorities will not automatically include this information in the initial calculation, so you’ll need to add it all yourself. For example, mothers of children under three years of age are entitled to a maternity deduction of €1,200 that they can collect in advance at a rate of €100 per month. There are also deductions for childcare expenses for working mothers.
READ ALSO: Who in Spain will save €1,000 in 2023 thanks to income tax changes?
Be aware of any regional deductions
You may be entitled to certain deductions, depending on where you live live in Spain. In order to pay less income taxes, you will almost always have to fill in the data yourself. These could include deductions for school expenses, buying a house or investing in newly created companies.
Remember to include interest, dividends and life insurance
Other amounts that will not automatically be generated and included in the draft version of your calculation are the bank interest you have earned from savings, any dividends you are paid from companies or life insurance payouts. You must include all of these in order to get an accurate calculation and ensure you're not withholding any important financial information.
READ ALSO: The tax changes in Spain in 2023 that you need to know about
Information for landlords
If you are a landlord and rent out a property, you will have to pay taxes for the profit you obtain and enter this data manually as it will not have been calculated for you. Remember that by including the rent you may be able to subtract expenses such as your IBI bill and your community bills for cleaning and upkeep of the building. In addition, you may be able to get a general reduction of 60 percent on the resulting amount. In the end, you will pay much less taxes than you think for renting your home in Spain. Be aware, this is not the case for vacation rentals, only if you're renting out long term.
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