As we have already been informing you, the Income and Wealth tax return campaign started last April 6 and ends on June 30 (with results to be paid by direct debit, until June 27, 2022). This campaign presents some novelties, which should be taken into account.
Regarding the new features in the Personal Income Tax for 2021, we can highlight some of them such as the new tax scales, the taxation of inheritance agreements, the new limits of reduction in the taxable base of the contributions to social welfare systems or the new deductions for works to improve energy efficiency in housing, etc…
Regarding the Wealth Tax 2021, the novelties are marked by the introduction of a section to identify the balances of virtual currencies (cryptocurrencies), which until now had to be included in the generic section of “Other assets and rights of economic content”. Also the valuation of real estate, for which it is established that the taxable base will be the reference value provided in the revised text of the Real Estate Cadastre Law, this valuation rule is added for real estate whose value has been determined by the Administration in a procedure. Without forgetting that in the case of life insurance when the policyholder does not have the power to exercise the right of surrender, and in the cases in which temporary or life annuities are received from a life insurance policy, the amount of the mathematical provision is included as a possible value used for the valuation.
All of the above, without prejudice to the regional deductions approved by each Autonomous Community within its jurisdiction.
Main changes in Personal Income Tax 2021
Extension of the exclusion limits of the objective estimation method (“modules”): For 2021, the same modules and application instructions as in 2020 are maintained, as well as the amounts of €250,000 and €125,000 for the volume of gross income in the previous year corresponding to all economic activities, except livestock, forestry and fishing, and for the operations in respect of which they are obliged to invoice, respectively. Likewise, the amount of the volume of purchases of goods and services that cannot be exceeded without leaving the regime is maintained at €250,000.
Waiver or revocation of modules for the year 2021: from 24-12-2020 to 31-1-2021. The waiver of modules in 2020 and 2021 is not binding for 3 years.
General reduction of economic activities in objective estimation: The general reduction is 20% for agricultural, livestock and forestry activities and 5% of the net income for the remaining economic activities.
Economic activities in direct estimation. Losses due to impairment of credits derived from the possible insolvencies of debtors: IRPF taxpayers who are considered small companies may deduct, in 2020 and 2021, losses due to impairment of credits derived from the possible insolvencies of debtors when at the time of accrual of the tax the period that has elapsed since the expiration of the obligation referred to in Article 13.1.a) of the LIS is three months.
Deduction of real estate capital of the amount reduced in the rent of premises destined to tourist activities, hotel and catering and commerce: From 01-01-2021, individuals who rent premises in which certain economic activities linked to the tourist sector, hotel and catering and commerce are developed and voluntarily agree to reductions in the rent corresponding to the months of January, February and March 2021, may compute as a deductible expense for the calculation of the real estate capital yield of the IRPF the amount of the reduction of the rent agreed during such months.
Income from real estate capital. Reduction of 60% for the lease of real estate destined to housing: With effect from July 11, 2021, the expression “income declared by the taxpayer” is clarified by adding that, the reduction can only be applied on the positive net income calculated by the taxpayer in his return-settlement or self-assessment, without its application on the positive net income determined by the Administration in the processing of a verification or inspection procedure (incorporating undeclared income or eliminating computed and non-deductible expenses), even when the taxpayer has collaborated with his return or acceptance during the processing of the procedure. With this regulation, the jurisprudential criterion recently established by the Supreme Court with respect to the previous regulation, which allowed the application of the aforementioned reduction in the verification or inspection procedure, is overcome.
Reduction of the term for the amounts owed by the lessees to be considered as doubtful balance: The term for the amounts owed by the lessees to be considered as doubtful balance will be 3 months in 2020 and 2021.
Amounts destined to amortization: Real estate acquired free of charge: The Supreme Court in its Ruling No. 1130/2021, September 15. 1130/2021, of September 15, has established as an interpretative criterion that, for the purpose of determining the depreciation applicable in the case of real estate acquired free of charge by inheritance or donation, the acquisition cost paid will be the value of the property acquired in application of the rules on Inheritance or Gift Tax or its value ascertained in these taxes (excluding the value of the land), plus the expenses and taxes inherent to the acquisition corresponding to the construction and, if applicable, all the investments and improvements made in the property acquired.
“Unit Linked” (life insurance contracts in which the policyholder assumes the investment risk): With effect from July 11, 2021Article 14.2.h) of the Personal Income Tax Law has been amended in relation to life insurance in which the policyholder assumes the investment risk, in order to adapt the requirements applicable to the latest regulatory amendments applicable to insurance entities.
Taxation of succession agreements: Effective July 11, 2021, it is established that the acquirer by virtue of a succession agreement must be subrogated in the value and date of acquisition of the assets in the original owner, in those cases in which the assets received are transferred within five years from the celebration of the succession agreement or from the death of the original owner, if earlier. In this way, the capital gain generated from the initial acquisition of the property until its transfer by means of a succession agreement or contract is subject to taxation. This modification will only be applicable to transfers of assets made after the entry into force of Law 11/2021, of July 9, on measures to prevent and combat tax fraud, i.e., July 11, 2021.
Gains excluded from taxation in cases of reinvestment in primary residence: For the purposes of calculating the reinvestment period in the exemptions for reinvestment in primary residence and in new or recently created entities, the period between March 14, 2020 and May 30, 2020 will not be taken into account because the period between March 14, 2020 and May 30, 2020 has been suspended in order to face the COVID-19.
Limits of reduction in the taxable base of contributions and contributions to social welfare systems: With effect from 01-01-2021, different limits in relation to social welfare systems are modified.
- Maximum annual contributions (except for group dependency insurance) and maximum joint reduction limit: The general reduction limit applicable to the taxable base for contributions and contributions to social welfare systems is reduced from 8,000 to 2,000 euros per year, although it is provided that the new limit may be increased by a further 8,000 euros for corporate contributions.
The contributions made by the individual employer to employment pension plans or mutual benefit plans, of which, in turn, he/she is the promoter and participant or member, as well as those made to corporate social welfare plans or collective dependency insurance of which, in turn, he/she is the policyholder and insured, will be considered as corporate contributions, for the purpose of calculating this limit.
- Transitional regime. Excess of contributions made and not reduced in fiscal years 2016-2020: A transitional regime is established that allows that, in the event that among the amounts pending reduction from fiscal years 2016 to 2020 there are contributions made by the contributor and contributions imputed by the promoter, it is understood that the amounts pending reduction correspond to contributions imputed by the promoter, with the limit of the contributions imputed in said tax periods. The excess over said limit will be understood to correspond to contributions made by the taxpayer.
- Excess of contributions and contributions corresponding to the year: From the 2021 period, when in the excess that occurs in the year, contributions of the contributor and contributions imputed by the promoter concur, the determination of the part of the excess that corresponds to both will be made in proportion to the amounts of the respective contributions and contributions.
- Contributions to social welfare systems of which the spouse of the taxpayer is a participant, member or holder: The maximum limit applicable for contributions to social welfare systems in which the contributor’s spouse is a participant, member or holder is reduced from 2,500 to 1,000 euros per year.
General tax scale, savings tax rates, scale of withholdings and payments on account applicable to recipients of earned income and scales applicable to workers posted to Spanish territory: With effect from 01/01/2021, a bracket is added to the general tax scale for general taxable income as from 300,000 euros with a tax rate of 24.50%. In line with this, a new bracket is introduced for the withholding base for earned income exceeding 300,000 euros, which increases the maximum withholding rate from 45% to 47%. Likewise, a bracket is added to the savings scale for taxable income over 200,000 euros with a tax rate of 26% (state + autonomous community scale).
In line with the above, the scales applicable to workers posted to Spanish territory are modified in the following terms: a) The rate applicable to the part of the general taxable income exceeding 600. 600,000; b) A new bracket is introduced for the part of the savings taxable income exceeding 200,000 euros, which increases from 23% to 26%. c) The withholding rate applicable to the remuneration paid by the same payer exceeding 600,000 euros is increased from 45% to 47%.
New deductions for works to improve energy efficiency in housing: Effective October 6, 2021 (Royal Decree-Law 19/2021, of October 5), new deductions are introduced in the Personal Income Tax of 20%, 40% or 60% for works in housing and residential buildings that improve energy efficiency and in the exclusion of taxation in said tax of certain subsidies and aids for the rehabilitation.
Deduction for investment in principal residence: In the section relating to the transitory regime of the deduction for investment in principal residence, the boxes corresponding to the construction of the principal residence are deleted, since the period of four years, extendable for an additional four years, in which the taxpayer had to finish the construction of his principal residence in order to be entitled to the transitory regime of this deduction, has expired. In order to minimize the possibility of error with respect to its application, in the case of extension or rehabilitation works and works and installations for the adaptation of the main residence of disabled persons, boxes have been included to indicate the date of commencement and completion of the works. In the case of the construction modality, the date of the deed of acquisition or new construction of the dwelling will be requested.
Other issues of interest. IPREM, legal interest, late payment interest and average annual salary of all income tax filers.
- The amount of the Public Indicator of Multiple Effect Income (IPREM) for 2021 is fixed at 7,908.60 Euros, in accordance with the provisions of the one hundred and twentieth additional provision of Law 11/2020, of December 30, of the General State Budget for the year 2021.
- The legal interest of the money in the fiscal year 2021 is maintained at 3% and the late payment interest referred to in article 26.6 of the General Tax Law is maintained at 3.75%, in accordance with the provisions of the forty-ninth additional provision of Law 11/2020, of December 30, of the General State Budget for the year 2021.
- The average annual salary of all income tax filers is maintained at 22,100 euros for the year 2021.
Guide to regional personal income tax deductions for the 2021 fiscal year
- Principado de Asturias
- Illes Balears
- Castilla-La Mancha
- Castilla y León
- Comunidad de Madrid
- Región de Murcia
- La Rioja
- Comunitat Valenciana
Impact of Covid-19 on Renta 2021
- The days of the state of alarm are computed for the purpose of considering a taxpayer as resident in Spain.
- For the purposes of the two-year period for exempting from taxation for reinvestment the capital gain obtained in the transfer of habitual residence, the days from March 14, 2020 to May 30, 2020 are not taken into account to face the COVID-19.
- For the purposes of the 6-month period to exempt from taxation the capital gain obtained in the transfer of any capital item, by reinvestment in life annuity, of a taxpayer over 65 years of age, the 78 days between 14-03-2020 and 30-05-2020 are not taken into account.
- If a worker had a vehicle on loan from his company, which he could use for private purposes, the restrictions on mobility due to the state of alarm do not affect the quantification of the aforementioned remuneration in kind.
- The workers in ERTE who have received from the SEPE amounts which did not correspond to them in 2021 and which they have had to return that year or will have to return them later, do not have to pay tax on them The problem may lie in knowing the data of the net amount which is the one to be included in the Renta 2021. The AEAT will update the tax data as it receives information from the SEPE.
- Taxpayers with gross income from work over 14,000 who have two payers, their company and the SEPE, as long as the second payer has paid them more than 1,500 euros, will be obliged to file a tax return and, normally, they will have to pay a deposit due to the deficit of withholdings that will have occurred.
- In the case of consumption aids in the form of cards or vouchers from local or regional governments, it will be necessary to analyze whether they qualify as capital gains or income from work.
- Employers or professionals who have received the extraordinary benefit for termination of activity must declare it as income from work.
- When the owner of a rented property has reached an agreement with the tenant not to charge rent for a few months in 2021, he will not impute income for that time, will deduct the expenses incurred and will not impute real estate income.
- If the landlord-tenant agreement has consisted of a deferral of some 2021 rents, they will not be computed as income as long as they are not due and there will be full deduction of expenses without imputation of real estate income.
- If the landlord-tenant agreement consisted of a rent reduction, the computation of income will be made in accordance with the agreement.
- If the tenant does not pay any rent in 2021 the lessor will have to impute the unpaid income and will be able to deduct, as doubtful balances, the unpaid amounts, but only if at least 3 months have elapsed since the first collection until 12-31-2021.
- Even if there have been mobility restrictions that may have prevented the use of a second residence, rent will have to be imputed for the second residence in 2021.
- The corresponding part of the supply expenses incurred in the habitual residence of the entrepreneur or professional for the days that, during the pandemic, he/she carried out the activity from home is not deductible, unless the residence has been affected to the development of the activity.
- In the event that a self-employed person has enjoyed the total or partial exclusion from the payment of RETA contributions derived from a lack of obligation or exemption, this will have no impact on the tax because it is not given the nature of full income or deductible expense for the determination of income.
- Subsidies for the self-employed with difficulties, granted by some Autonomous Communities that include, among other contingencies, the suspension of the activity or the drop in income as a result of the COVID 19 epidemic, whether applied to offset expenses for the year or the loss of income, will be treated as current subsidies, i.e., income from the activity attributable to the year.
- For the purposes of the quantification of the “salaried personnel” module, in the objective estimation system, salaried personnel must be valued, employee by employee, based on the conditions in which they are in the ERTE, calculating exclusively the hours of actual work to be performed, not including the part of the employment contract that is temporarily suspended.
- If a mother has been in ERTE, during the months in which the suspension of the employment contract has been total, she will not be entitled to the deduction for maternity.
- The right to the deduction for large families or family members with disabilities is not lost for having been in ERTE during 2021 Likewise, the self-employed who have received the extraordinary benefit for termination of activity will be entitled to the same.
Taxpayers not required to file
|Rule||Income obtained||Limits||Other conditions|
|1º||Income from work||22.000||One payer (2nd and remaining ≤ €1,500 per year).Passive benefits from two or more payers whose withholdings have been determined by the Tax Agency.|
|14.000||More than one payer (2nd and remaining >1,500 euros per year).spouse’s compensatory pensions or alimony annuities not exempt. Payer of the income not obliged to withhold. Income subject to a fixed withholding rate.|
|Income from movable capital. Capital gains.||1.600||Subject to withholding or payment on account, except for capital gains from transfers or redemptions of shares or units of CII in which the withholding base should not be determined by the amount to be included in the taxable base.|
|Imputed real estate income. Income from Treasury Bills. Subsidies for the acquisition of subsidized or subsidized housing. Other capital gains derived from public aid.||1.000||–|
|2º||Income from work. Income from capital (movable and real estate). Income from economic activities.|
economic activities. Capital gains.
|1.000||Subject or not to withholding or payment on account.|
|Equity losses.||<500||Whatever its nature.|
Comments to the table:
The 2nd rule and its limits are independent of those contained in the 1st rule, acting in any case as a corrective criterion of the 1st rule for small amounts of income. Consequently, if a taxpayer is not obliged to file a tax return due to the nature and amount of the income obtained in accordance with the limits and conditions of rule 1, the application of rule 2 will not be applicable.
When, from the application of the limits and conditions of rule 1, the taxpayer is obliged to file a tax return, rule 2 and its limits must be applied to verify whether the exclusion of the obligation to file a tax return applies in the case of small amounts of income.
It should be borne in mind that rule 1 does not include capital losses among the cases exempted from the obligation to file a tax return.
Likewise, it should be noted that rule 2 does not list the imputation of income.
WEALTH TAX 2021
With regard to this fiscal year 2021, we must bear in mind the following novelties:
Scale of taxation: the taxation of the last tranche of the state scale (for assets exceeding 10,695,996.06€) is increased by one point, from 2.5% to 3.5%.
The right to the application of the Autonomous Community’s own regulations approved by the Autonomous Community for non-residents: It is extended to all non-residents, whether they are residents in a Member State of the European Union or of the European Economic Area or in a third State, the right to the application of the own regulations approved by the Autonomous Community where the greater value of the assets and rights of which they are holders and for which the tax is demanded, because they are located, can be exercised or have to be fulfilled in Spanish territory.
Reference value of real estate: in line with the changes introduced in other taxes in the valuation of real estate, for which it is established that the taxable base will be the reference value provided in the revised text of the Real Estate Cadastre Law, approved by Royal Legislative Decree 1/2004, of March 5, this valuation rule is added in the Wealth Tax for real estate whose value has been determined by the Administration in a proceeding. In general, the “value” of the assets or rights will be considered to be their “market value”, with the special features described below. In the case of real estate, its value will be the “reference value” provided for in the real estate Cadastre regulations. And, in any case, for the determination of the taxable base, the “value declared” by the interested parties will prevail when it is higher than the market or reference value.
Taxation of life insurance: The Tax Law is amended, with effect from July 11, 2021, to contemplate that, in those cases in which the policyholder does not have the right to exercise the total surrender on the date of accrual of the tax, the insurance will be computed by the value of the mathematical provision on the aforementioned date. However, this rule will not apply to temporary insurance contracts that only include benefits in the event of death or disability and other complementary risk guarantees.
Temporary and life annuities: The taxable base in temporary and life annuities is currently quantified by the present value of the annuities. However, in life insurance contracts whose consideration is received in the form of an annuity, it may happen that this does not fully incorporate the return of the capital contributed, for example, when the insurance provides, in addition to the receipt of an annuity, an additional benefit in the event of death.
In these circumstances, the application of the rule of article 17.two of the PI Law would determine the inclusion in the taxable base of the tax of a lower value than that corresponding to the total economic rights derived from the insurance contract.
In order to solve this situation, it is now provided that, when temporary or life annuities are received from a life insurance policy, they will be computed at their surrender value at the date of accrual of the tax and, failing that, at the mathematical provision at the aforementioned date.
Securities representing participation in the equity of any type of entity: It is considered necessary to correctly identify the issuing entity of such securities, so the Tax Identification Number must be entered.
Cryptocurrencies (virtual currencies): Finally, regarding the new features of the Wealth Tax return form, a section is introduced to identify the balances of virtual currencies, which until now had to be included in the generic section of “Other assets and rights of economic content”.
New regional deductions in the tax liability: Finally, it should be noted that the Autonomous Communities of Galicia, La Rioja and the Region of Murcia have approved new regional deductions in the tax liability.
Other issues to consider:
- Taxpayers whose tax liability, after applying the appropriate deductions or allowances, is to be paid, or when, in the absence of this circumstance, the value of their assets or rights exceeds €2,000,000, are obliged to file a tax return. Persons deceased in the year 2021 before December 31 are not obliged to file a tax return for this tax.
- Non-resident individuals who own property located in Spain or rights that can be exercised in Spanish territory are subject to real obligation taxation. According to DGT V2380-17, a resident in the USA, who deposits shares of a German company in a Spanish bank, is taxed under real obligation. Persons subject to personal income tax under the special regime for impatriates are also subject to tax under the real obligation. Residents, subject to personal liability, are taxed on all assets or rights regardless of the place where they are located.
- Although non-residents, in general, are taxed according to State regulations, those who are residents in a State of the EU or the European Economic Area will be entitled to apply the regulations of the Autonomous Community where the highest value of the assets and rights of which they are holders and for which tax is required (in this case it is only required for those that are located or can be exercised in Spanish territory). This is an option that must be exercised during the statutory tax return period (DGT V3054-16).
- Law 11/2021, of July 9, on measures to prevent and combat tax fraud, extends to all non-residents, whether they are resident in a Member State of the European Union or of the European Economic Area or in a third State, the right to the application of the specific regulations approved by the Autonomous Community where the highest value of the assets and rights they own and for which the tax is required is located, can be exercised or must be complied with in Spanish territory; All this in line with the recent case law of the Supreme Court on the extension of the principle of freedom of movement of capital enshrined in the Treaty on the Functioning of the European Union.
- The exemption limit for the main residence is maintained up to a maximum amount of €300,000. It should be remembered that this amount is for each taxpayer, so that a married couple owning a property acquired in community of property will not be taxed on it if its value does not exceed €600,000.
- The taxable income will be reduced by the minimum exempt amount approved by the Autonomous Community and, in the event that the Autonomous Community has not approved the minimum exempt amount, the taxable income will be reduced by €700,000. The minimum exemption is set at €700,000 for both resident and non-resident taxpayers, except in Aragon (€400,000) Extremadura and Catalonia (€500,000) and Valencia (€600,000). In addition, in some Communities the minimums for disabled taxpayers are raised (such as Extremadura and Valencia).
- Rates: in general, the state rate is applied, with 8 brackets and rates from 0.2% to 3.5%, except in some Communities, such as Andalusia, Asturias, Balearic Islands, Cantabria, Catalonia, Extremadura, Galicia, Murcia and Valencia, which have their own rates.
- The sum of the total amount of Wealth Tax and Personal Income Tax cannot exceed 60% of the sum of the taxable income tax bases, without taking into account for these purposes the part of the savings base of capital gains and losses derived from the transfer of assets older than one year, nor the part of the Personal Income Tax liability corresponding to such base. The part of the Wealth Tax corresponding to assets that are not susceptible to produce income in the Income Tax will not be taken into account either. If the sum of the contributions exceeds 60% of the Personal Income Tax base, the Wealth Tax liability will be reduced up to that limit, without the reduction in the latter Tax exceeding 80% of its liability. In other words, whatever the Personal Income Tax base is, a minimum of 20% of the Wealth Tax liability will be paid.
- Also bear in mind the tax rebates approved by each Autonomous Community. There may be taxpayers who, although they do not have to pay this tax, must file a tax return if the value of their assets and rights exceeds €2,000,000.
See regional bonuses
You can contact this professional office for any questions or clarification you may have in this regard.