Personal Income Tax (PIT) Return: Family, Income, and Investments

Posted on Jan 11, 2025 in Economy

Personal Income Tax (PIT) Return Options

• If we are talking about the same family, they have two options when filing a PIT return:
  • Joint Declaration:
    • They file together or individually; one family member cannot be excluded.
    • Income of all members is included.
    • If earnings are > 8000€/year, an individual cannot be considered to determine the personal minimum.
  • Individual Declaration:
    • Everyone files individually, including all their income.
    • If earnings…
  • Parents’ children could be included in parents’ declaration when:
    • They are minors.
    • If they are older than 18 and not economically independent.
    • If they earn less than 22,000€/year.
  • Parents can decide with children:
    • To include them on their declaration:
      • Either 100% or 50% (if divorced).
      • This will apply a small reduction.

If a person works more than two years in the company:

• • Compensation is considered irregular income.
  • A reduction for irregular income (30%) would be applicable.
  • Therefore, income tax applies to only 70% of compensation.
  • You can apply the reduction if:
    • It does not exceed 300,000€.
    • If she had not applied to this tax benefit in the previous 5 years.

Bonus:

• • Yearly bonus: has to be declared as employment income (monetary income).
  • Three-year-period bonus:
    • Declared as irregular income.
    • A reduction of 30% is applied, so only 70% of income is taxed, if:
      • The bonus does not exceed 300,000€.
      • The tax benefit has not been applied in the last 5 years.
    • Need to wait until the third distribution to apply the reduction for irregular income.

Life insurance:

• • Employment income → income in kind.
  • Should be applied in the PIT Return.
  • Gross income:

                  Health insurance:

• • Employment income → income in kind.
  • Should be applied to the PIT Return.
  • Maximum should be 200€.
  • If we have a bigger value → do the difference between the total and the exempt times the withholding tax on the minimum.
  • Gross income:

• If you are living there → no fiscal impact.

• If there is no one living in an owned house:
  • It is applied the imputed income → 2% of the cadastral value * (months of emptiness/total months (12)).

• If you rent it:
  • For it to be a residence (rent it to a couple):
    • Real Estate Income.
    • Applies the reduction of 60% from the net income → because it is a regular house.
  • For it to be a working space (rent it to a lawyer):
    • Real Estate Income.
    • Because it is a working place, you do not apply the 60% reduction.
    • Need to sum up the total net income plus the withholding tax on the net income.

• If you sell a house and buy another one with that money → capital gain.

     Food tickets:

• • Employment income → income in kind.
  • Should be included in the PIT Return.
  • Maximum for exemption → 11€/day.
  • If an employee consumes a higher value, it would need to be included on the PIT Return.
  • If not, it is completely exempt.

Contribution to pension plan:

• • Employment income → income in kind.
  • Should be included in the PIT Return.
  • A reduction could be applied when…
  • If the value given is 700€, the reduction would be of 700€ → completely exempt.

Updating courses:

• • Employment income → income in kind.
  • Completely exempt from payment on the PIT Return.

• Withholding tax (on account payment):
  • Employment income: it is given.
  • Real Estate Income → 19%.
  • Irregular income → 19%.

• Cadastral value: the value that the government applies to a house (valuing the land or the flat you live in)
  • If you have reviewed the cadastral value during the last 10 years → 1.1% of the cadastral value.
  • If you have not reviewed the cadastral value in the last 10 years → 2% of the cadastral value.
  • If there is no cadastral value → 1.1% of 50% of the acquisition price.

• Life insurance coefficient:
  • Perpetual income (does not end):

Temporary income:

• National dividends:
  • Investment income.
  • Saving tax base.
  • Withholding tax → 19% of gross income.

• International dividends (from Italy, for example):
  • Investment income.
  • Saving tax base.
  • International double taxation deduction could be applicable → deducting the lowest value between the tax paid in the foreign country or the amount that he should pay in Spain (if he had obtained the dividends here).
  • Need to calculate:

    • • 

• Sale of subscription of rights:
  • Capital gain.
  • Saving tax base.
  • Withholding tax → 19% of the amount received.

• Sales of shares
  • No withholding tax applied.
  • FIFO criteria → first in, first out.
  • Capital gains → need to calculate

    • 

      → basically:

• Transfer from one fund to another:
  • No tax impacts if they do not sell anything.

• Sale investments:
  • Capital gains.
  • Saving tax base.
  • Withholding tax → 19% over the gain.

• Long-term saving product:
  • No impact on tax.

• Obligations:
  • Investment income
    • Capital gains.
    • Gross interests: for example, a coupon.

• Retirement insurance:
  • Will affect the tax only when retirement happens
    • Investment income.
    • Savings tax base.
  • Before retirement → nothing happens, no tax impact.

¡¡¡ You cannot sell shares and buy them after before two months. It is not considered capital losses derived from sales of assets with repurchase (2 months/1 year) !!!

In future years:

• Yearly dividends and sale of shares → same as before.

• If they sell participations of investment funds:
  • Capital gain → calculate it.
  • Saving tax base.
  • Withholding tax → 19%.

• Long-term savings product:
  • When the profit is received, it would be exempt from the PIT.