One of the most important issues that affects many business owners (as well as self-employed workers) is, without a doubt, being "on good terms" with the Treasury. And in this sense, Knowing how personal income tax works is one of the aspects that can give you the most problems., especially when it comes to filing returns (if you don't want the Treasury knocking on your door).
So, how about we explain this to you in a way that you understand? Well said and done, here we have prepared an article where you will find everything you need to know about personal income tax.
What is personal income tax
Let's start by knowing exactly what we mean by personal income tax. And not many know that personal income tax corresponds to Personal income tax. In reality, most people use the acronym, but when it comes to understanding it, they don't really know what it implies.
Well, this tax is an important pillar in Spanish taxation and is established, to a certain extent, in the Spanish Constitution. Where? Exactly where it states that All Spaniards must contribute to the maintenance of public expenses. That is, we must contribute so that the country moves forward, does not go into debt or go bankrupt. But not only does what is raised go towards that, but part of it is also used to help people who are in a worse situation.
Personal income tax only affects people who receive income and who also live in Spain. But it depends on each autonomous community since deductions, bonuses, etc. can be established. in each one.
And in case you're wondering, yes, the more income you receive, the more you will have to pay in tax.
What exactly does personal income tax tax?
We have told you before that the personal income tax is related to the income received. But, within these incomes (or incomes), several of them must be specified, which are:
- Work performance. Whether they are employed (salaried) or self-employed (self-employed).
- Pensions That they would fall within the income of work, even if they do not actually work.
- Capital returns. For example, income from real estate, any savings you have...
- Returns from economic activities.
- Capital gains, but also losses or income imputations.
Now, you have to know that by receiving all that income you are not going to pay for it; In reality, the calculation is made once the expenses that you have borne are deducted. That is to say, They eliminate Social Security contributions, commissions, expenses that you have borne for your work, etc.
Another point to keep in mind is that Not all income must be declared. Although at the beginning we said yes, there are laws that allow some exempt income. And what are these? We list them all for you:
- Maternity or paternity benefit.
- Loans between family members.
- Labor compensation, in case it is due to termination of the worker or dismissal.
- Family business donation.
- Jobs abroad.
- Condominium extinctions.
- Capital gains of the dead.
- Scholarships
- Unemployment benefits (be careful, in a single payment).
- Transfer of habitual residence or property assets if it is for people over 65 years of age.
- Settlement.
- Long-term savings plans or systematic savings.
- Remuneration in kind (as long as these are not taxed).
How personal income tax works
Now that you have a little more clarity on personal income tax, you surely want to know how it works to understand how it is calculated.
To begin with, Personal income tax is calculated taking into account the payrolls or accounting carried out by businesses. Of course, the banks themselves also come into play since it is the "usual and legal" way in which income is received. However, sometimes these incomes are not calculated in such detail, but instead an estimate is made according to the objective characteristics of the businesses.
Based on this, a scale is established in such a way that, when a scale is reached, the personal income tax percentage will be one or the other. In other words, the more income (already discounting expenses), the more personal income tax has to be paid.
Furthermore, it may be the case that, throughout the year, taxes have been overpaid and the income becomes negative. That would mean that It is the Treasury that should return your money. because he has been overcharging you. For example, because you have paid more as a freelancer and your income is much lower.
How to pay personal income tax
Personal income tax is paid annually through the income tax return. This must be done every year and presented from the months of April to June. However, it is always presented based on the previous year. That is to say, In 2024, the 2023 declaration is presented because it must cover the entire year.
During this period, the Treasury launches a campaign to help people make the declaration and present it. In fact, There are many who make an appointment so that the Treasury officials themselves can help them prepare the declaration to avoid failures or errors that, if detected, could lead to sanctions (even if they were not done in bad faith). There are also private companies, or even banks, that dedicate themselves during these periods to making statements to their clients.
And the result may be to pay (with which you will have to deposit money into the Treasury) or to collect (on the contrary, it is the Treasury that must deposit money into you). In the latter case, you have 6 months to do so, it is not immediate, while, if you have to pay, you have a limited deadline and, if you do not do it on time, you will have to bear a late fee.
Know how personal income tax works, like any other tax, procedure, etc. that you have to comply with will not only provide you with information and the power to do things well, but it will also help you feel calmer because you will know that, in a way, you have acted in good faith and that you have done so trying to follow the law. Do you have any doubt left?