With one month to go until the end of the year, we are at the right time to adopt measures that will help to reduce our IRPF Declaration 2018 (Personal Income Tax Declaration). Declaration to be submitted between April and June 2019.
Next we will analyze those that may be more interesting and that will help us to plan the closing of the fiscal year.
Personal Income Tax Declaration 2018. How to reduce it
Contributions to Insured Pension Plans and Provident Plans
Despite rumours of a possible elimination of their tax advantages in the future, their favourable tax treatment is still maintained. Thus, these contributions reduce the tax base by up to 8,000€, with a limit of 30% of the sum of net income from work and economic activities. In addition, if the limit has been reached, it is also possible to reduce up to 2,500€ for contributions to the spouse’s social security systems. When the spouse obtains income from work or economic activities of less than 8,000€. Or when he or she does not obtain this type of income in any amount.
Contributions to social security systems set up in favour of people with disabilities will also give the right to reductions in the taxable base. If there is a relationship, it can reach up to 10,000€ per year. Provided they are people with a degree of physical or sensory disability equal to or greater than 65%. Psychic equal to or greater than 33%. As well as people who have a judicially declared incapacity.
Deduction for the acquisition of a habitual residence.
If the habitual residence was acquired before 2013 and deducted for it, you can still take advantage of the deduction for home investment. For this reason, it is advisable to calculate whether it is interesting to exhaust the limit of 9,040€ between interest and amortised capital of the loan that was used to pay it and to obtain a maximum deduction of 1,356€. Or if it is a married couple that bought half, declare separately and amortize the double, 18,080€.
Donations.
Donations to NGOs, foundations and non-profit organisations allow a deduction of 75% on the first 150€. And a 30% on what exceeds that amount may go up to 35% if it is the third year that is donated to the same entity and the donation has been equal to or greater than the previous one.
With regard to this point, bear in mind that in recent weeks the Tax Agency has been imposing a new criterion. For which it does not allow the deduction for donations to be applied to those made to subsidised schools and for which certain educational benefits are obtained as consideration.
Also keep the supporting documents for compulsory union or professional association fees. As long as they do not exceed 500€, they will be deducted from the next Personal Income Tax Return as deductible expenses. Both their income from work and their income from economic activities.
Deduction for investment in new or recently created companies.
In order to encourage this type of investment, this deduction has been improved this year. Thus, taxpayers may deduct 30% of the amounts paid for the subscription of shares or holdings in these companies when certain requirements and conditions are met. The maximum deduction base is 60,000€ per year.
Exemptions in the transfer of the habitual residence.
If you are going to transfer your habitual residence, bear in mind that if you are over 65 years of age, your potential capital gain will be exempt from taxation in your Personal Income Tax Return. If you are under that age, remember that the income may be exempt if all the amounts received are used to purchase a new habitual residence.
In the event that the proceeds are not used entirely for the purchase of a new habitual residence, only part of the profit may be exempt.
Exemptions in capital gains for over 65s.
In addition to the exemption on the sale of the aforementioned habitual residence, taxpayers over the age of 65 may exclude from tax the capital gains that become apparent on the occasion of the transfer of capital assets. Not necessarily real estate, provided that the amount (total or partial) obtained by the transfer is used within six months to constitute a life annuity insured in their favour, with a limit of 240,000€.
Profit and loss.
If, in 2018, it has transferred any asset, thereby obtaining a capital gain. It would be a good time to consider selling those shares that will never recover their purchase value generating capital losses that will compensate for the capital gain that has already materialized.
The self-liquidations of the previous 3 years should also be checked. In case you still have losses that could never be compensated. And, consequently, to decide now some sale that would generate capital gains that in future years would not be able to compensate for exceeding the 4 years allowed to compensate them.
Expenses on customer services.
If you plan to make expenses for customer care and suppliers before the end of the year and will exceed the deductibility limit set at 1% of the net turnover (sales volume). It may be interesting to postpone the excess of this amount until 2019.
Reduction of economic activity yields for new entrepreneurs.
Those who start an economic activity will have the right, during the first two years in which it produces a positive result, to apply a 20% reduction in their economic activity performance. With a maximum base of 100,000€. If you are in the second year with the right to apply the reduction, it may be interesting to bring forward as much turnover as possible to fiscal year 2018.
Real estate leases.
If you plan to incur expenses related to rental properties, it may be interesting to do so before the close of 2018. In order to reduce the yield to declare for renting them. In addition, in the case of rental housing is applied a reduction of 60% in the yield to declare. This is not the case if the property is rented for the exercise of an activity, or as a tourist rental.
Retirement and redemption of pension plan.
If you retired in 2010 or earlier. Remember that 2018 is the last year in which you will be able to redeem your pension plan in the form of capital with the right to a 40% reduction on all or part of what you redeemed. 2018 will also be the last year to qualify for this benefit if you retired in 2016.
Dividends.
In the face of persistent rumours of an increase in tax rates on savings. If you are a member of an entity and are considering the distribution of an important dividend, it may be interesting to make the distribution in 2018 before a potential increase in rates.
If you have any questions regarding your future income tax return, please do not hesitate to contact us.
Arrabe Integra
Tax Consulting Dept.