Statement of income

When making the income statement, all income generated during the year is taken into account, discounting expenses that are deductible. But not all citizens must make the income declaration, there are several exceptions as we will see below.

The income declaration is made only by natural persons, which makes reference to human persons. Unlike legal entities, which refers mainly to companies, which do not pay income tax, but pay what is known as corporation tax.

The personal income tax is levied on all this income by applying a percentage progressively to income, that is, it is a progressive tax, the higher the income, the higher the percentage to pay, taking into account the sections (everyone pays the same percentage within each section). Once that amount, known as the lump sum, is calculated, all deductions are subtracted. This amount, once the corresponding deductions have been applied, reflects the liquid fee, which will be the final amount we pay as personal income tax.

Full fee – Deductions = Net fee

During the year, it is normal for both the company we work for and our financial institution to deduct part of the money we earn to give it to the Treasury. Thus, the first one lowers the monthly percentage earmarked for personal income tax from our payroll and the second subtracts the appropriate amount from us when we receive, for example, capital gains from investments in the Stock Market or interest on a bank deposit.

On many occasions, these withholdings that have been made during the year are higher than what we should have paid, so that in the income statement it can be returned to us. That is to say, that the Treasury returns money to us for the excess taxes that we have paid. This is normal since the taxes that are paid during the year do not take into account the deductions of each person. It is for this reason, and in order to regularize all these concepts and economic items, that the income statement is born.

What income and expenses does the income statement include?

The income that is included in the rent can come from both work income (either employed or self-employed), as well as other types of income such as capital gains or capital income. In Spain the main revenues are broken down as follows:

• Earnings from work : Salaries, payroll or pensions, mainly.
• Income from movable capital: Mainly interest and dividends. But life insurance is also included.
• Income from real estate capital : These are the income derived from the properties available to their owners, leased or transferred to third parties, not related to economic activities.
• Income from economic, business or professional activities .
• Capital gains and losses : Derived, for example, from the sale of real estate, shares, obtaining prizes.

The deductions can be for living in a house for rent, or having completed the rehabilitation of the habitual residence. For certain investments or donations, such as investing in a newly created company or investing money in a pension plan. For living with children under 25 years of age with little income, or with parents over 65 years of age.

In Spain some deductions are included in the draft of the rent. But there are many others that do not, so it is very important to review the draft well to include all possible deductions and ensure the greatest savings in the income statement.

Who is obliged to declare in Spain?

Any natural person, whether Spanish or not, who has resided more than 183 days in the calendar year, who has Spain as the main nucleus or base of their activities or economic interests, is obliged to make the income statement in Spain. direct or indirect.

However, there are a few exceptions that can exempt us from having to file an income tax return. It mainly depends on the amount of income, deductions and where it comes from.

It is important to know that although a person is not obliged to declare, they can know his draft, which is highly recommended, since if he goes out to pay he will not present the income statement, but if it comes out to return it, it is worth it to present it, as you will receive a payment for it.

Tax residents in Spain are not obliged to make the income declaration:

• If the income received is less than 22,000 euros in the year, as long as they come from a single payer, or if the income received by the second or third payers does not exceed 1,500 euros as a whole.
• If the income received is less than 14,000 euros in the year, even if the income from earned income is received by two or more payers. Except if you don’t meet the two rules below.
• If you have not received income from movable capital and capital gains subject to withholding or payment on account, for a total amount greater than 1,600 euros per year.
• If you have not received imputed real estate income, yields from treasury bills and subsidies for the acquisition of officially protected or priced-priced homes, and other capital gains derived from public aid, for a total amount greater than 1,000 euros per year.
• If you have exclusively received full income from work, capital (furniture and real estate – for leasing real estate …), economic activities (businessmen, professionals …) and capital gains, subject or not to withholding, when their sum does not exceed 1,000 € or those who have had capital losses of less than € 500.
• If you are a self-employed worker with an annual income of less than 1,000 euros.

However, on many occasions people who are not obliged to file an income tax return will be paid back and therefore it is compensated for them to do so. That is why it is advisable to look at the draft to see if it is worth it or not to make the income statement.

What happens if I do not file the income tax return?

If someone does not file an income tax return being obliged to do so, they will commit a tax offense that is classified as minor, serious or very serious. The slightest occurs if it is the person himself who notifies that he has not presented it and when he does it, he returns. In that case the penalty is 100 euros. If you pay or will have an interest surcharge depending on the delay in filing the return.

If it is the Treasury who claims the omission of the declaration and returns to return the penalty is 200 euros. But if, on the contrary, it pays, it will entail a fine of between 50% and 150% of the value of the debt, which will depend on the economic damage to the public treasury, on the seriousness of the concealment (it is aggravated, for example, if there are operations in the stock market for which you have to pay) and whether other tax offenses have been committed.

Most common mistakes in the rent draft

The Tax Agency can make mistakes when preparing the models for the income statement. In addition, not all income, much less deductible expenses, are included in the draft. See what the draft rent does not include.

Here are the two most frequent failures:

1. Errors related to the taxation of the home : One of the most common errors is the incorrect calculation of the deduction for a home acquired before 2006, although it is also quite common not to apply the corresponding main home tax deductions if the granting bank The mortgage does not have proof that this loan is, precisely, for a habitual residence or first home.

The mortgage loan can also interfere in the correct preparation of the draft if there has been a change of bank or if a new one is negotiated. In the event that the house has been bought by a couple and both spouses are facing the mortgage loan in equal parts but only one of them appears in the cadastre, the most normal thing is that the Tax Agency calculates the deductions incorrectly.

In addition, if it is the first habitual home that the couple acquires, the expenses derived from the purchase – linked insurance, notary, registration, taxes, etc. – are also deductible, and here the Treasury can make a mistake if these financial outlays are not recorded.

2. Judgments related to marriages and separations : These types of situations give rise to important deductions, such as the one obtained for the amount of compensatory pensions to the former spouse and annuities for alimony to common children or for the payment of the former spouse’s habitual residence. Therefore, special care must be taken with this section.

If you have received your draft of the income statement and you have realized that it is poorly prepared, you will have to modify it to record the tax returns that really correspond to you. You can do it online, on the website of the Tax Agency, or by going in person to a tax office, for which you will have to make an appointment. Likewise, the Agency staff may ask you to justify the changes you make to your draft, for which you will have to submit the necessary documentation. See how to make the income statement.