For those who are “tax residents in Spain and have to declare their income and wealth tax”, the following applies.

The 2021 income and wealth tax campaign, which has already begun and ends on 30 June, brings important innovations that should be taken into account when filling in the tax return in order to benefit from them and reduce the amount payable.

This year, the possibility of granting deductions for renovation work on residential buildings aimed at reducing energy consumption for air conditioning, replacing boilers or improving the energy efficiency of the building in which you live has been introduced. This deduction can be claimed for both condominiums and rental flats.

For the taxation of property rentals, among other things, the period for deducting the amounts owed by tenants from the full income from property capital will be reduced from six to three months in the financial year 2021. Landlords who are not considered major landlords, who have rented out the premises and have voluntarily agreed to reduce the monthly rent for January, February and March 2021 will be able to record the amount of the reduction as a deductible expense.

It should be noted that residents of the Balearic Islands can claim special deductions for the rent of a flat, which can be deducted up to 400 euros, as well as for expenses for language schools and school books for children, kindergarten costs and extracurricular activities.

Another change this year is the increase in taxes for the highest incomes, which can be up to 48.5% in the Balearic Islands. So it is always advisable to do good tax planning to avoid being taxed at this maximum rate, as there are also fewer deductions for retirement savings this year (this year the new maximum deduction for private retirement savings is 2,000 euros per year, whereas until 2020 it was 8,000 euros).

The tax base for net interest income has also been changed, as a new tax bracket starting at 200,000 euros with a tax rate of 13% has been introduced at both national and regional level. This brings the rate to 26%.

In addition, the wealth tax for assets of more than 10 million euros is raised from 2, % to 3.5%, i.e. by 1%.

Recipients of the subsistence minimum will have to file an annual income tax return regardless of the amount of income, even though it is tax-exempt income and the vast majority of recipients do not have to declare it in their tax returns.

As we have reported in previous articles, taxpayers who own cryptocurrencies should bear in mind that there is a special section in the 2021 income tax return for declaring these currencies, as the Ministry of Finance is seeking more comprehensive control of investments and transactions with these digital currencies to combat tax fraud.

When completing the income tax return, it is necessary to pay close attention to the boxes relating to changes in personal situation, tax-free income or state and regional deductions, mortgages, pension plans, gifts, etc., as they directly affect the outcome of the tax return and are important to ensure that, in the best case, the tax is refunded or at least the minimum amount is paid to the Treasury.