The term “tax relief” refers to a reduction of someone’s tax burden if they meet certain conditions. We’ll explain the most common forms of tax relief for individuals and businesses and what to do to benefit from them.
Taxes play a big role in how governments fund their operations and invest in essential services like healthcare, education, security, and infrastructure. The process of tax collection involves tailoring financial schemes so that each taxpayer contributes based on their unique financial, family, and personal circumstances—or pays less if they contribute to specific social, environmental, or economic goals. Two key players in this game are “tax credits” and “tax deductions.
In the financial realm, tax relief essentially means a discount or reduction. It’s a form of financial relief that trims down the amount we owe in taxes to the government, whether we’re working for someone else or running our show. Now, tax laws lay down the rules we need to follow to qualify for a tax deduction. Since tax relief is governed by law, we’ve got to provide the right documents to back up our claims.
There’s a whole array of tax relief options out there, and individuals can snag some that businesses can’t (and vice versa). Governments often assign specific purposes to tax credits and deductions, ranging from tailoring a person’s tax load to their specific situation to pushing forward economic, social, or environmental goals.
Over in Spain, the central and regional governments have their own set of tax relief measures tied to factors like a person’s disability, being part of a large family (with at least three kids or other qualifying circumstances), pension plans, and more. Even self-employed folks and businesses, both small and large, can get in on the action, especially if it means boosting job creation, investing in research and development (R&D), or embracing renewable energy.
The world of tax credits and deductions is pretty vast. Now, let’s dive into some of the most common ones.
Tax credits and deductions for individuals
At some point during the year, we all tend to reflect on the money we’ve earned—whether from our jobs, investments, or some other business venture. We also take a moment to consider any changes in our family, like the arrival of a newborn. Why? These factors come into play when it comes to grabbing those tax deductions that are up for grabs in our neck of the woods.
The usual reasons folks like you and me can snag a tax deduction are:
Maternity. In Spain, if you’re a mom working for someone else or running your show and you have kiddos under the age of three, the central government has your back with a tax deduction for childcare and nursery expenses. Check out this article (in Spanish) from Santander Consumer España’s blog, Tu Futuro Próximo (“Your near future”), for the nitty-gritty on the tax perks waiting for moms of newborns.
Large family. Here’s the deal: If you’ve got a family with at least three kiddos in Spain, you’re in line to claim a tax credit handed out by the central government. Families with three or more little ones who also meet some other financial criteria get to slip into a special category.
Disability. Over in Spain, when it comes to personal income taxes, folks can grab these tax credits from both the central and regional governments. All it takes is showing a disability of 30% or more, and you and your household can reap the benefits.
Conservation of the planet. Here’s the scoop: in Spain regional governments are giving a thumbs-up to initiatives like buying electric or sustainable vehicles and making energy-efficient home improvements by tossing in some tax deductions.
Sure, nabbing tax deductions for home-related stuff is pretty common, but there’s more to it than just that. Plus, here’s a nugget for you: regional governments in Spain can tweak or add to the national tax deductions game.
Now, if you’re curious about deductions tied to home purchases in Spain, you might want to check out this article (in Spanish) by Openbank. It spills the beans on whether you can score a deduction for your mortgage.
Tax deductions for self-employed workers
Generally speaking, freelancers can snag pretty similar tax deductions, no matter which corner of the globe they call home. Both national and regional governments play the deduction game to ease the tax load on freelancers doing their business hustle. Now, let’s dive into some of the usual suspects when it comes to deductions:
Value-added tax (VAT). We’ve all danced with this consumption tax, shelling out a bit extra on every good and service we snag. But here’s a perk: self-employed folks and businesses can claw back a chunk of the VAT they cough up on the goods and services they grab for their business gigs. A nice little twist, huh?
Office expenses. Rent for your office digs and bills for essentials like electricity, water, Internet, and the telephone? Yep, you can knock those off the list of expenses. And here’s a twist: with the whole “working from home” trend taking over, some governments are cool with you deducting a slice of those home-related expenses too. Nice little bonus, right?
External services. Here’s the scoop: this deduction is all about services you bring in from outside for your business hustle. Think of things like transportation, advertising, communications, and the pros who handle your business accounting and legal matters.
Transport and travel. Alright, here’s the deal: if you’ve got receipts and a solid case, you can knock off spending on vehicles or fuel, travel allowances, and accommodation as legitimate business expenses.
Employee costs. When it comes to bringing on board a team, the costs can be deductible. This covers things like social security contributions, training courses, and insurance policies for your awesome crew.
Tax credits and deductions for companies
Tax relief for both small and big companies usually has its eyes set on goals that make a positive impact on the community or the region they call home. It’s the government’s way of saying “good job” for efforts like reducing CO2 emissions, boosting employment, supporting sustainable development, and other good deeds. Here are some specifics:
Job creation. Alright, check this out: posting new job listings could bring in some tax relief, depending on the rules laid down by both the national and regional authorities. And here’s a sweet twist—tax credits might come your way if you’re hiring young folks, individuals with disabilities, or moms doing the superhero gig of raising kiddos.
Investment in R&D. Here’s the scoop: companies can snag a tax deduction for the expenses they shell out on projects aimed at boosting their know-how or diving into some tech innovation. Cool, right?
Sponsorship and donations. Alright, here’s a nifty tidbit: to nudge SMEs and big companies into supporting art, culture, and sports initiatives, governments often roll out the red carpet of tax incentives. So, if these businesses dive into sponsorship and philanthropy, they can score some sweet tax perks. Cool, huh?