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Practical manual for Income Tax 2021.

General and regional deductions applicable in 2021

Regulations: Articles 67 and 77 of the Personal Income Tax Law . 

Once the full, state and regional quotas have been determined, the following liquidation phase of IRPF aims to determine the respective net, state and regional quotas. To do this, the following groups of deductions must be applied to the full amount of contributions:

1. Deduction for investment in main home: Transitional scheme

As of January 1, 2013, the deduction for investment in primary residence was eliminated. However, for those taxpayers who, before that date, had acquired their habitual residence or paid amounts for its construction, extension, rehabilitation or carried out works for reasons of disability in it (with the exception of contributions to housing accounts) and had enjoyed this tax benefit, a transitional regime has been established that allows them to continue practicing the deduction under the same conditions in which they were doing so.

For such taxpayers, the amount of the deduction for investment in primary residence will be broken down into two sections: one, state and the other, autonomous.

  • The state section , the amount of which is calculated in accordance with the provisions of article 68.1 of the Personal Income Tax Law as amended until December 31, 2012, will be applied in its entirety to reduce the state full rate .

  • The autonomous section whose amount is determined by the provisions of article 78 of the Personal Income Tax Law in the version in force until December 31, 2012, will be applied in its entirety to reduce the autonomous integral quota.

The percentage to be applied will be either the one approved by each of the Autonomous Communities in accordance with article 46 of Law 22/2009, of December 18, or, failing that, the percentages established in article 78.2 of the Law of Personal Income Tax in the version in force on December 31, 2012.

2. Deduction for investment in companies of new or recent creation

Taxpayers can fully deduct from the state tax the amount corresponding to the deduction for investment in new or recently created companies regulated by article 68.1 of the Income Law, when they meet the requirements and conditions required to enjoy this new incentive.

3. General deductions from state regulations

The deductions listed below, whose regulation is contained in the IRPF Law itself (article 68. 2, 3, 4 and 5) and, in relation to the transitional regime of the deduction for rent of habitual housing, in the fifteenth transitional provision which refers, in turn, regarding its regulation for taxpayers who are entitled to this transitional regime to the regulations of the Personal Income Tax Law in force as of December 31, 2014, can be applied, in general, by all taxpayers who meet the legally required requirements to be entitled to them, regardless of the Autonomous Community of the common regime in which they have resided during 2021, with the exception of the specialties that derive from the deduction for income obtained in Ceuta or Melilla.

  • Deductions for incentives and stimuli to business investment

  • Deductions for donations and other contributions

  • Deduction for income obtained in Ceuta or Melilla

  • Deduction for actions for the protection and dissemination of Spanish Historical Heritage and World Heritage

  • Deduction for rental of the residence. Transitional scheme

The amount of these deductions is distributed as follows:

  • 50% of the total amount is applied to reduce the total state quota.

  • 50% of the total amount is applied to reduce the full regional quota.

4. Deductions for works to improve the energy efficiency of homes

New for 2021 and effective from October 6 , article 1 of Royal Decree-Law 19/2021, of October 5, on urgent measures to promote building rehabilitation activity in the context of the Recovery, Transformation and Resilience Plan ( BOE of the 6th), introduces a new fiftieth Additional Provision in the Personal Income Tax Law , by which the following temporary deductions are created for works to improve the energy efficiency of homes:

a. Deduction for improvement works that reduce heating and cooling demand.

b. Deduction for improvement works that reduce the consumption of non-renewable primary energy.

c. Deduction for energy rehabilitation works in buildings predominantly used for residential purposes.

The amount of these deductions falls on the state integral quota l after subtracting the amount of the deduction for investment in new or recently created companies provided for in article 68.1 of the Personal Income Tax Law and 50% of the total amount of the deductions for incentives and stimuli to business investment, for donations and other contributions, for income obtained in Ceuta or Melilla and for actions for the protection and dissemination of the Spanish Historical Heritage and of the cities, groups and assets declared World Heritage provided for in sections 2, 3, 4, and 5 of article 68 of the Personal Income Tax Law.

5. Autonomous community deductions

The Autonomous Communities of the common regime, making use of the regulatory powers assumed in relation to the ceded part of the IRPF , have approved autonomous deductions that may only be applied by taxpayers who, fulfilling the requirements established to be entitled to them, have resided during the 2021 financial year in their respective territories.

The amount of these deductions is fully applied to reduce the total regional quota.

Note: The application of general and regional deductions may not give rise to a negative net quota. General deductions that cannot be applied due to insufficient state tax rate cannot be deducted from the regional tax rate. Likewise, regional deductions that cannot be applied due to insufficient regional tax rate cannot be deducted from the state tax rate.

Finally, the taxpayer must keep the supporting documents for the deductions made for any verification by the tax authorities, without it being necessary to attach the supporting documents for the deductions made to his/her tax return.

6. Deduction applicable to family units formed by tax residents in Member States of the European Union or the European Economic Area

This deduction is introduced, from January 1, 2018, in favor of those taxpayers of IRPF , members of a family unit in which one of its members resides in another Member State of the European Union or the European Economic Area, which prevents them from filing a joint return. This deduction, when more favourable, equates the amount payable by these taxpayers resident in Spain to what they would have been entitled to if all members of the family unit had been tax residents in Spain and had chosen to pay taxes jointly.

The amount of this deduction is not divided 50/50 between the full state and regional quota, but rather reduces each of them in the manner established by the Forty-eighth Additional Provision of the Personal Income Tax Law and which is discussed in the section referring to said deduction.