B Law & Tax
22 November 2023

Tax advisor: Strategies to Alleviate the Burden of IRPF at Year-End

The Registry of Expert Tax Advisors (REAT) is issuing suggestions to ease the tax burden of the Personal Income Tax (IRPF) at the annual fiscal closing. Presented in Tenerife, the 2023 Income Tax Declaration Planning report offers up to 100 recommendations to “optimize the tax impact” before December 31.

The General Council of Experts highlights aspects such as new limits on contributions to retirement plans and reductions for energy efficiency projects in homes. Valentín Pich, leader of the General Council of Economists, mentions political uncertainty and the recent validation of the wealth tax as factors driving taxpayers to accelerate tax planning.

Here are some of the REAF’s suggestions to enhance the income declaration for the year 2023 before the end of the fiscal period.

 

IRPF : Optimizing Labor Income

The recently published REAF report offers a series of recommendations in the field of labor income. It highlights that retirement plans withdrawn after retirement enjoy a 40% reduction on contributions made before 2007, provided they are withdrawn in the form of capital. It also emphasizes that compensations for work-related displacements granted by the employer to the worker are not subject to taxation if certain requirements are met, with an increased exemption of €0.26 per kilometer since last summer. It is also mentioned that services performed abroad may be exempt up to €60,100, and dismissal compensation is not taxable up to €180,000, provided the worker does not return to the company within the next three years.

 

IRPF :  Real Estate Tax Strategies

In its report on real estate properties, the REAF advises landlords to make improvements before the annual fiscal closing to reduce the net yield, especially if there are pending investments. It also highlights changes for the next year, such as the reduction to 50% in the positive net yield of real estate capital.

The advice includes formalizing lease contracts before December 31 to take advantage of these modifications. Additionally, it points out the obligation to fiscally declare the proportional part of subsidies received by the community of property owners and highlights the exemption from capital gains for individuals over 65 who reinvest in a new home or lifetime annuity.

These tips aim to optimize the tax situation in the real estate sector, providing strategies to reduce taxes and comply with current regulations.

 

IRPF : Incentives for Energy Efficiency

Starting in 2023, bonuses are implemented to promote energy efficiency. A 15% discount, with a cap of €20,000, is introduced for the acquisition of plug-in electric vehicles for personal use, valid between June 30, 2023, and December 31, 2024. Additionally, a 15% bonus, with a maximum of €4,000, is established for expenses incurred between June 30 and December 31, 2024, on the installation of battery charging systems for electric vehicles.

In the real estate sector, property owners who rent homes can deduct between 20% and 60% of the costs of works carried out until the next December 31 (or until the end of 2024 in some cases) if these improvements reduce energy consumption or improve energy efficiency. The report highlights the opportunity to make changes such as installing solar panels or systems that enhance the energy efficiency of homes.

 

IRPF : Retirement

Taxpayers with a pension plan can reduce their tax bill by up to 1,500 euros or 30% of earnings. The limit can reach 8,500 euros with employer contributions. If a spouse has income < 8,000 euros, contributions can be made to the partner's plan (max. 1,000 euros).

Payments for compensatory pensions and alimony (not for children) also reduce the taxable base. The parent who financially supports the children, even if not living with them, can apply the minimum deduction for dependents. In 2023, the maternity deduction was extended to non-working women.

 

Self-Employed Individuals and Entrepreneurs

The report addresses tax considerations for self-employed individuals and entrepreneurs. The possibility of deducting expenses for supplies used for the activity is highlighted, specifying the proportion according to the square meters used. It is emphasized that the invoice in the name of the spouse does not prevent deduction. Expenses for maintenance in establishments with card payments are mentioned. Self-employed individuals in the module system are advised to consider switching to direct estimation before December. For companies close to one million euros in turnover, it suggests postponing operations to take advantage of the reduced rate of 23%. The possibility of deducting 30% of investments in new businesses is highlighted, increasing to 50% in emerging companies, up to €100,000 annually.

 

Key Considerations in Cryptocurrencies and Finance

Aspects related to cryptocurrencies and financial gains/losses are highlighted. The obligation to declare the difference in the purchase/sale of cryptocurrencies and their exchange is emphasized. It is mentioned that the sale of cryptocurrencies before the end of the year will be reflected in the 2024 income tax return. It is informed that those who make profits from the transmission of heritage assets have until the end of the year to offset them with losses. Additionally, it is noted that positive returns from stocks or interests can generate losses of up to 25%, compensable in the following four years.

 

 

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