Deductions Relating to Income Tax with the New Tax Reform in Spain

This article addresses some of the changes in the newly proposed Spanish tax reform relating to income tax.  However, the elements contained in the draft bill are provisional and subject to change before final publication in the Official Spanish Bulletin.

1. Deductions Related to the Income Tax Calculation

  • Deduction for investors:  taxpayers engaged in economic activities and meeting the requirements established for the special regime application on small companies may deduct 5% of net income in both the first and subsequent tax years;
  • Deduction for donations:  the 10% deduction for foundations and associations of public interest donations is eliminated;
  •  Deduction for political contribution:  a new deduction is considered for expenses or input relating to a political party in an amount equal to 20% of membership fees and participation in political parties, federations, societies, or electoral associations with a cap of 600 Euros per year;
  • Deduction for income obtained in Ceuta and Melilla:  deductions on income from companies based in these areas will be limited;
  • Primary home:  the deduction for a rented primary residence is eliminated, although it will continue to apply to  those taxpayers who  signed a lease before January 1, 2015;
  • Large family:  the new reform introduces deductions for large families or disabled persons dependent on the taxpayer.

2. Other Changes

Other changes, which the corporate-tax reform introduces, deserve consideration.  These changes include the rules for determining the tax base, and the rules will apply to the income tax.  However, the following points deserve special attention:

  • Depreciation charge:  a new table with 10 assets groups uses new amortization periods.
  • Capital gains:  the tax deduction on capital gains disappears in favor of a transitory regime.
  • Deductions to incentivize specific activities:  most deductions disappear, but some remain: the Research and Development (R & D) deduction, the deduction concerning movie production, and deductions for job creation and disabled employees.

This article is not considered as legal advice

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