Business The classic end of the year reminder to save...

The classic end of the year reminder to save taxes

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The usual advice should be reviewed so that the taxpayer can optimize his next income tax return.

In the general tax base, the main focus of action is on contributions to Voluntary Social Welfare Entities (EPSV) and other social security products. The maximum annual limit of reduction in the general tax base of the tax is 5,000 euros for individual contributions and 8,000 for business, establishing a joint limit of 12,000 euros.

Regardless of the foregoing, the reduction by contribution in favor of the legally constituted spouse or partner with incomes of less than 8,000 euros to be integrated into the general tax base is placed at 2,400 euros.

Retired taxpayers may not reduce their general tax base by individual contributions to EPSV. In the case of contributions in favor of the spouse, the restriction operates in the event that it is the spouse holder of the EPSV who is in the aforementioned retirement situation, regardless of the retirement situation of the contributing spouse. This limitation operates from the beginning of the year following the one in which the retirement occurs.

Compensate income

In the tax base of savings, special attention should be paid to the integration and compensation of positive and negative income. For these purposes, it must be taken into account that, as a general rule, there are two independent taxable sub-bases of savings. On the one hand, the returns on capital, which will be integrated by interest, yields derived from the transfer of fixed-income securities, dividends that exceed the minimum exempt of 1,500 euros, income from insurance products and real estate rentals whose destination is the Habitual housing. On the other hand there are the gains and losses derived from the transfer of assets such as shares (quoted or not), subscription rights, investment funds and real estate, being able to compensate the gains with losses of these assets.

To carry out this analysis, it is also advisable to consider the negative items that the taxpayer may have and that come from previous years, knowing that this year 2019 will be the last year in which negative rents that come from the year 2015 can be compensated, and that have not yet been possible to take advantage of.

On the other hand, we cannot forget about the deduction for payments related to habitual housing, which will generate a deduction of 18% – in general and savings-housing accounts – or 23% for children under 30 and owners of large families, the maximum annual deduction base is capped at 8,500 euros, including principal and interest.

In Álava was specifically improved the deduction for taxpayers who establish their habitual residence and center of vital interests in Alava municipalities with less than 4,000 inhabitants, extending the percentage and maximum deduction base up to 20% and 9,180 euros per year, respectively, or up to 25% and 9,384 euros if they are under 30 or holders of large families.

In Gipuzkoa, who has acquired their habitual residence before January 1, 2012 may reach a maximum deduction base of 12,000 euros.

Finally and as a small joy of face, for example, to the next Christmas lottery draw, it should be remembered that the exempt minimum relative to the prize draws organized, among other organizations, by the State Lottery and Betting Society was extended of the State, Red Cross and ONCE, which reaches 20,000 euros and will be 40,000 euros from 2020. The excess prize obtained over the exempt limit, yes, will continue to be taxed at 20%.

The next income campaign

The last weeks of the exercise offer the opportunity to make decisions that help us suffer less in the next income campaign. So you should be aware of the tax modifications that may affect us. Regarding the Personal Income Tax (Personal Income Tax) (IRPF), there have been few draft fiscal innovations introduced in this 2019. In this apparent legislative tranquility both the holding of the elections to General Meetings of last May and their role have played the fact that our legislators are assessing a substantial tax reform for the year 2021.

However, there are some changes promulgated this year that should be noted.

Attraction of human talent towards historical territories

Last year we echoed the new special tax regime that certain workers displaced to the historical territories could choose for the performance of certain qualified jobs. This regime allows the beneficiaries to enjoy a 15% exemption from their full income from work and the possibility of deducting certain expenses related to travel with the limit of 20% of the total income; or not consider them remuneration in kind if they are satisfied by the employer.

This year, the procedure to accredit this option by the displaced workers has been regulated so that there is also adequate coordination with the paying company for the purpose of the withholding practice.

Notwithstanding the foregoing, and in line with the most advanced countries in our environment, the main fiscal innovation of the year in this search for talent for the Basque Autonomous Community consists in the favorable regulated tax treatment in Bizkaia and Gipuzkoa – not in Álava – for the so-called 'carried interest' (or profit sharing) that the managers who convert into the risk capital entities they manage, subject to compliance with certain requirements.

The formula finally chosen has been different in each of the historical territories, although the effect on taxation may be similar. Thus, in Bizkaia, the treatment of these incomes has been maintained as work income, but with the application of the 50% reduction of the income obtained in a notoriously irregular way over time and without applying the general limit of 300,000 euros for its integration into the tax base. Thus, the 'carried interest' would pay a maximum of 24.5%, considering the maximum marginal rate of 49% of the general tax base.

Gipuzkoa, on the other hand, considers these incomes as yields of movable capital, so that it taxes the participation in benefits at a maximum rate of 25% on the taxable base of savings.

New tax rate of the general tax base and update of family and personal deductions

For the fiscal year 2019, the tax rate of the general tax base is deflated by 1.5%. Similarly, the same percentage increases the reductions for joint taxation, the general reduction of quota, the deductions for descendants, ascendants, age and disability, although the latter is not updated in Gipuzkoa.

In Álava, a regional norm was enacted at the beginning of the year that redesigned the deduction for age, with the intention of replacing it in time with a budget line of direct aid for people over 65. In addition, a 'baby check' was introduced for new births. However, the Draft Tax Regulations Foundational Standard that is currently being processed cancels these measures, without having come into effect among Alava taxpayers.

In the field of tax incentives for patronage, a new rule has been published in the territory of Bizkaia that increases the general deduction percentage in favor of non-profit entities from 20% to 30%. Gipuzkoa, meanwhile, has raised that deduction percentage to 35%.

Self Employment Promotion

In Álava and Gipuzkoa, a new deduction has been established for the amounts paid in cash for the subscription of shares in entities in which taxpayers provide their services as working persons. The maximum deduction base over successive tax periods is 12,000 euros, with the deduction percentage being 15% for women and 10% for men.

Tax options regime

The regional regulations that currently regulate personal income tax entered into force in 2014 and established a strict system of tax options, in which an error or omission of the taxpayer in the preparation of his self-assessment could in fact mean the loss of the right to apply certain deductions and tax incentives, once the deadline for submitting such self-assessment expired. Although with certain nuances and limits, Álava and Gipuzkoa have made this system more flexible by allowing them to be modified once the voluntary period of declaration has been finalized through the rectification of self-assessments, provided that a previous requirement of the Tax Administration has not occurred. In Bizkaia, however, the original rules on tax options are maintained.

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