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In personal income tax, taxpayers can deduct certain expenses from their gross work income, under specific conditions. The following are the most relevant deductible expenses:
Social Security Contributions: Compulsory Social Security contributions made by the worker can be fully deducted from gross work income.
Contributions to Social Security Mutual Societies: Compulsory contributions to social security mutual societies that cover widowhood and orphanhood in the event of the death of the participant.
Fees to Unions and Professional Associations: The deduction of fees paid to unions and compulsory contributions to professional associations is allowed, up to a maximum of 500 euros.
Legal Defense Expenses: Expenses related to the legal defense of the worker are deductible up to a limit of 300 euros.
“Other Expenses”: There is a fixed deduction of 2,000 euros for “other expenses” applicable to all workers. This deduction may be higher in certain cases, such as for workers who accept employment in a different city or for workers with disabilities.
Irregular Work Income: Earnings from work with an accrual period longer than two years or that are not normally obtained can benefit from a 30% reduction, provided that they are included in a single tax period and do not exceed 300,000 euros.
This reduction is not applicable if it has already been applied to income generated in more than two years during the five previous tax periods, except in cases of termination of an ordinary or special employment relationship.
For income between 700,000.01 euros and 1 million euros, derived from the termination of an employment or commercial relationship, the 30% reduction will apply only to the amount calculated as 300,000 euros - (severance pay - 700,000 euros).
No reduction will be applied if the returns generated are equal to or greater than 1 million euros.
Low Work Income: Taxpayers with net income from work of less than 19,747.50 euros and without other non-exempt income exceeding 6,500 euros can apply the following reductions:
Larger reductions apply for workers over 65, the unemployed who accept a job that requires a change of residence, and people with a recognized disability.
Travel Expenses: Since July 17, 2023, the tax exemption for travel expenses compensated by the company increased to 0.26 euros per kilometer traveled, provided that the reality of the trip is justified. Amounts paid for tolls and parking fees are also exempt.
Taxpayers who earn income from economic activities can deduct certain business expenses, provided that they meet the requirements established by the regulations. The main deductible expenses and applicable reductions are described below:
Net business income is calculated by subtracting from gross business income the expenses necessary to obtain it.
Taxpayers who apply the method of direct estimation To calculate their business income, they follow the Corporate Tax (CIT) regulations with some exceptions. Deductible expenses are those that are not excluded as deductible under the CIT.
Tax Amortization
Supplies
For taxpayers who use part of their regular home for business activities, utility costs (water, electricity, gas, telephone, Internet) are partially deductible. The deduction is 30% of the expenses in proportion to the square meters used for the activity with respect to the total area of the house.
Living Expenses
Living expenses in catering and hospitality establishments are deductible if they are related to business activity and are paid electronically. The deductible amount limits are the same as for employed workers.
Health Insurance Premiums
The premiums paid by a self-employed person for their own health insurance, that of their spouse and that of their children under 25 who live with them are deductible. The maximum deduction limit is 500 euros per person, or 1,500 euros if the person has a disability.
Reduction for Irregular Income
Full returns from economic activities generated over a period of more than two years, or that are manifestly irregular, can enjoy a reduction of 30% if obtained in a single tax period. The maximum amount to which this reduction can be applied is 300,000 euros.
Fixed Reduction for Net Business Revenue
A fixed reduction of 2,000 euros applies to net business income. Additional reductions:
Reductions for People with Disabilities
Higher reductions apply for taxpayers with recognized disabilities.
For taxpayers who do not meet the above requirements and whose non-exempt income, including business income, is less than 8,000 euros, a reduction of up to 1,620 euros applies.
If returns are between 8,000 and 12,000 euros, the applicable reduction is 1,620 euros - (0.405 x [business income - 8,000 euros]).
Personal income tax payers in Spain can deduct certain expenses from the gross income generated by their real estate. These deductions apply primarily to income derived from leases, and their objective is to reduce the tax base by considering the expenses necessary to obtain such income. The following are the allowable deductions:
Expenses Necessary to Obtain the Rent
Taxpayers can deduct all expenses necessary and directly related to obtaining rental income, including:
Interest on Borrowed Capital: Interest paid on loans intended for the acquisition or improvement of the leased property is deductible. However, deductible expenses cannot exceed the gross income generated by the property. If expenses exceed income, the excess amount can be deducted in the next four tax periods.
Repair and Maintenance Expenses: The costs incurred for the repair and maintenance of the property are also deductible, provided they are considered necessary to maintain the use and enjoyment of the property.
Taxes and Fees: IBI; Local taxes such as IBI, which tax property ownership, are deductible.
Insolvency Provisions: It is possible to deduct insolvency provisions as long as they meet the requirements established in the Personal Income Tax Act.
Personal Service Expenses: Amounts paid to third parties for the provision of personal services related to the lease, such as rental management, are deductible.
Tax Amortization: it is deductible as long as it adjusts to the actual deterioration of the property. It is considered to meet the effective impairment requirement if it does not exceed 3% of the greater of the following values:
60% reduction in housing leases: The positive incomes generated by the lease of real estate intended for housing are reduced by 60%, provided that they are correctly declared and comply with established legal requirements.
30% reduction for Irregular Income:
In Spain, income from movable capital includes income such as dividends, interest and other income derived from assets or rights other than real estate, according to the Personal Income Tax Act. To determine net returns on movable capital, certain specific deductions from gross income are allowed. The following are the applicable deductions and reductions:
Management and Depositing Expenses for Tradable Securities
Only expenses directly related to the administration and storage of negotiable securities are deductible. This includes, for example, the fees that are paid for maintaining a securities account.
Expenses related to discretionary and individualized management of investment portfolios are not deductible if investments are made following the account holder's specific instructions.
Expenses Related to the Provision of Technical Assistance and the Leasing or Sublease of Movable Property, Businesses or Mines:
The expenses necessary to obtain income from the provision of technical assistance and the lease or sublease of movable property, businesses or mines are deductible.
In addition, the impairment of the assets or rights from which the income comes can be deducted, provided that these expenses are necessary to obtain the income.
Some movable capital returns can benefit from a 30% reduction if they are generated over a period longer than two years or if they are manifestly irregular and are recorded in a single tax period. This reduction applies to the following types of returns:
Income Generated by Intellectual and Industrial Property: Income generated by intellectual property (if the taxpayer is not the author) and by industrial property that are not used for the development of the taxpayer's business activities.
Income from the Provision of Technical Assistance: The income obtained from the provision of technical assistance, provided that the provision does not constitute a business activity of the taxpayer.
Income from the Leasing of Movable Property, Business or Mining: Income derived from the lease or sublease of movable property, businesses or mines that are not part of a taxpayer's business activity.
Income from the Transfer of Image Rights: Provided that such assignment is not carried out within the framework of the taxpayer's business activities.
Application Limit: The 30% reduction can only be applied to a maximum amount of 300,000 euros. Any amount that exceeds this limit will not be eligible for the reduction.
The tax treatment of alimony and child support has some peculiarities that taxpayers should take into account:
The alimony that a taxpayer pays to their former spouse, in compliance with a court decision, is deductible from the personal income tax base. This means that the amount paid for this concept is subtracted from the taxpayer's total income before calculating the tax, thus reducing the base on which the tax is applied.
Unlike alimony paid to the former spouse, child support is not deductible from the taxpayer's taxable income. This implies that the amounts paid for child support are not subtracted from total income for the calculation of the tax.
However, progressive tax scales may be applied separately to the amount of child support if the taxpayer is not entitled to the downline kinship allowance. This may result in a lower tax burden, since it is allowed to apply different brackets of the personal income tax rate to the remaining income, once alimony has been deducted.
A taxpayer's annual contributions to qualifying pension plans are deductible up to a maximum of 1,500 EUR per year. The limit will be increased by 8,500 euros when it comes from business contributions or employee contributions to the same social security instrument for an amount equal to or less than the amounts resulting from the following table, depending on the amount of the business contribution.
However, in any case, multiplier 1 will apply when the worker obtains work income of more than 60,000 euros during the year from the company that makes the contribution.
The amount may not exceed 30% of total net income from work and economic activities.
In addition, taxpayers whose spouses do not earn income from work or economic activities exceeding 8,000 euros can deduct from their own tax base contributions made to pension plans that meet the requirements on behalf of their spouse, up to a maximum of 1,000 euros per year.
In 2023, the following deductions apply:
Personal Assignment:
Minimum family support:
Minimum family allowance for disability of ascendants and descendants:
When two or more taxpayers are entitled to apply these bonuses, they are divided equally among the taxpayers. However, when taxpayers have different degrees of kinship, the bonus is applied by the taxpayer with the closest kinship, unless their annual income, excluding exempt income, does not exceed 8,000 euros, in which case the bonus is applied by the taxpayer with the next degree of kinship.
The bonus cannot be applied when the income of the ascendants or descendants to whom this bonus may apply is greater than 1,800 euros and they submit their own income tax return.
The minimum thresholds indicated above will apply to personal and family circumstances existing on the date of accrual of the tax (generally speaking, December 31).
In cases of legal marital separation, the downward line kinship bonus is applied by the parent who has custody and custody of the child/children on the date of accrual (generally, December 31) because he is the person with whom the child/children live.
When custody and custody is shared, the allowance is apportioned between the parents, regardless of which of them the child (s) are living with on the date of accrual.
Capital losses derived from transfers of assets are integrated into savings income and can only be offset by capital gains integrated into savings income for the tax period. If the result of the compensation of capital losses is negative, they can only be offset by certain positive returns on movable capital, with a limit of 25% of those positive returns on movable capital. If the result of this last compensation is still negative, they can only be offset by capital gains (or 25% of positive capital returns) integrated into savings income generated in the following four years.
Capital losses that do not result from capital transfers are integrated into general income and can only be offset by capital gains integrated into the general income for the tax period. If the balance is negative, it must be offset against the positive balance resulting from offsetting the income for the tax period and the income charges included in the general tax base with a limit of 25% of that positive balance. If a negative balance persists after this compensation, its amount must be offset in the following four years.
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