INCOME TAX INNOVATIONS IN 2021: NEW DEDUCTIONS

 

If we had to name the most important innovation in 2021 Income Tax, this would be, without doubt, the introduction of three new deductions for works which improve energy efficiency of main residence. Most specifically, 2021 Income Tax Return admits the following new deductions:

1. FIRST DEDUCTION: 20% of the amounts paid for WORKS that reduce HEATING AND COOLING of the habitual residence by, at least, 7%. This deduction admits a maximum base of 5.000€
2. SECOND DEDUCTION: 40% of the amounts paid for works that reduce NON-RENEWABLE ENERGY CONSUMPTION by, at least, 30%. In this case the maximum deduction base is 7.500€
3. THIRD DEDUCTION: 60% of the amounts paid for works that improve ENERGY EFFICIENCY of dwellings located in buldings for mainly residential use. In this case, the maximum deduction base is 5.000€, though the rest may be deducted in the following four years, with the same annual limit and up to a total maximum of 15.000€ (including the amount deducted in 2021).

Evidence of energy efficiency improvement

The improvement is to be determined with basis on two ENERGY EFFICIENCY CERTIFICATES, issued by a technician of an approved inspection body: one before and one after the works.

To be deductible, the works must start on a date equal or later than 10.06.2021 and finish before 12.31.2022 (in case of the 1st and 2nd deductions) or before 12.31.2023 (in case of the 3rd deduction).

Please, note that the deduction is not applicable to the parts of housing used in business activities.

Besides, the 2nd and 3rd deductions are not applicable to elements such as garage spaces, sotrage rooms, gardens, parks, etc.

The deduction has to be applied in the tax period in which the Energy Efficiency Certificate is issued or in the period of payment, if this is prior to the issuance of the certificate.

Finally, notice that each of these deductions is incompatible with the other two.

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OPTION FOR THE SPECIAL CALCULATION METHOD OF ADVANCE CORPORATE TAX

 

If the tax profit of your company has fallen sharply this year or if your company’s result in 2021 was much higher than usual, you might be interested in calculating the advance Corporate Tax 2022 according to the special method provided in article 40.3 of the Spanish Law No. 27/2014, of November 27th of 2014. ¹

Following this method, the taxable base of the advance payment is calculated on the tax profit of the first 3, 9 or 11 months of the year (instead of being calculated on the full amount of the results of the previous one).

The rate applied to this base will be 5/7 of the usual rate applicable to the Company. That is to say: if the taxable income of the company is usually subject to a 25%, the advance payment will be 18% of the calculation base; in case of a new company with a tax rate of 15%, the advance payment will be 11% of the calculation base.

Option for the special calculation method

It is important to remember that the option for this calculation method must be explicitly requested by filling in the boxes No. 133, 621 and 642 of the Spanish tax form No. 036.

This option must be requested during the month of February 2022.

In any case, the advance payment must be done by submitting a form 202 within the first 20 calendar days of the months of April, October and December. ^{2 3}

Those companies whose base results from the installment payment turn out to be negative are not required to file the form 202.

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1Spanish Corporate Tax Law.

2In case of a group of companies it is to use the Spanish tax form is No. 222.

3If the company fiscal year did not coincide with the natural year, the advance payment would be done within the first 20 days of the 3rd, 6th and 9th months of the company fiscal year.