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Practical manual for Income Tax 2023.

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

Family unit consisting of the spouses Mr. "A", resident in Spain and Mrs. "B", resident in Germany until 2023, with a recognized degree of disability of 40% and the son of the above, Mr. "C", under 18 years of age, who lives with Mr. ARM in Spain.

Determine whether or not the deduction applicable to family units formed by tax residents in Member States of the European Union or the European Economic Area is applicable, and, if so, the amount that must be deducted from the state integral quota and the autonomous integral quota of the IRPF declaration, fiscal year 2023 by Mr. "A" and his son, Mr. "C", taking into account the following data:

  • In the IRPF declaration for 2023 of Mr. "A" his total state quota amounts to 15,250 euros and his total regional quota amounts to 16,000 euros, being entitled to general deductions from the quota amounting to 1,550 euros.

  • In the IRPF declaration for 2023 of Mr. "C" the sum of his full contributions, state and regional, amounts to 300 euros, and he is not entitled to any deduction.

  • The non-resident member of the family unit, Mrs. "B", paid the amount of 380 euros for the Non-Resident Income Tax corresponding to the income obtained in Spanish territory in that year 2023.

  • The total net tax that would have resulted from having been able to choose to pay taxes jointly by all members of the family unit would have been 29,280 euros.

Solution :

Previous note: The numerical data used in this example are simulated and have the sole purpose of explaining how this deduction is calculated and how its amount is distributed when there are several taxpayers of IRPF , integrated into the family unit, who are entitled to it. It is therefore noted that the amounts of full quotas and net quota do not coincide with those that could result in a real scenario.

1. Calculation of the deduction applicable to family units formed by tax residents in the EU / EEA

  • Sum of the following installments:

    - Taxpayer Mr. "A": Sum of full state and regional contributions minus deductions: (31,250 − 1,550) = 29,700.00

    - Taxpayer Mr. "C" Sum of full state and regional contributions reduced by deductions (300 − 0) = 300.00

    - Non-resident Mrs. "B":

    Non-Resident Income Tax Fee: 380.00Total amount (C1): (29,700 + 300 + 380) = 30,380.00

  • Amount of the net tax if all were residents and paid taxes jointly (C2): 29,280.00

  • Difference (C1 -C2): (30,380 − 29,280) = 1,100.00

    Note: Since the difference is positive (1,100), it is appropriate to apply the deduction for this amount. If this difference had been negative, the amount to be computed would be zero.

2. Calculation of the total amount of the deduction that must be applied to each resident, taxpayer of IRNR :

Sum of the full state and regional quotas reduced by the deductions of taxpayers Mr. "A" and Mr. "B": (29,700 + 300) = 30,000.00

  • Amount corresponding to taxpayer Mr. "A": (29,700 x 1,100 ÷ 30,000) = 1,089.00

  • Amount corresponding to taxpayer Mr. "C": (300 x 1,100 ÷ 30,000) = 11.00

    Note: The calculation of the amount of the deduction to be applied to each resident will be carried out in proportion to the respective total quotas reduced by the deductions.

3. Amount of the deduction that will be deducted from the state full rate and the regional full rate

  1. The percentage that the IRPF quotas represent with respect to the C1 amount is calculated and this percentage is applied to the amount of the deduction that corresponds to each resident .

    Percentage of quota IRNR with respect to C1: (380 ÷ 30,380) x 100 = 1.25%

    Part corresponding to Mr. "A": 1,089 x (1.25 ÷ 100) (*) = 13.61

    Part corresponding to Mr. "C": 11 x (1.25 ÷ 100) (*) = 0.14 

    (*) These amounts will reduce the total state quota.

  2. The remainder is divided between two

    Part corresponding to Mr. "A": (1.089 - 13.61) ÷ 2 (**) = 537.70

    Part corresponding to Mr. "C": (11 - 0.14) ÷ 2 (**) = 5.43

    (**) These amounts will reduce the full state quota and the full regional quota.

  3. Amount of the deduction that will reduce the full state and regional quotas

    Mrs":

    Amount that reduces the total state quota (13.61 + 537.70) = 551.31

    Amount that reduces the autonomous integral quota = 537.69

    Mr. “C”:

    Amount that reduces the full state quota (0.14 + 5.43) = 5.57

    Amount that reduces the autonomous integral quota = 5.43