Investors are increasingly interested in managing their investments themselves. This is often, regardless of their wealth and applies even more so in a crisis, like the one we are currently living through. Investors want to be hands-on to maintain and enhance the value of their savings and thereby obtain higher returns. It is well-known that one of the essential factors to consider in a financial plan are taxes, which is a topic we need to be well-versed in to be able to minimise effectively and in turn maximise the profitability of our investments.
It is important to note that, although exceptional tax deferrals have been provided for certain models and taxpayers (Medidas Tributarias COVID-19 trans. “COVID-19 Tax Measures”), the deadline for the Income Tax Return (Model 100) has not been modified and runs from 1 April to 30 June 2020.
The purpose of this entry is to summarise key concepts that we’ve seen when providing support to our Partners when dealing with their Income Tax Return. Let’s get to it:
Most financial products are taxed on the savings base (such as income from capital gains yield or capital gains/losses). There are, of course, exceptions, such as pension plans or dependency insurance, among others, but we will not discuss these here.
Capital gains/losses are those variations that are detected as changes in the value of the taxpayer’s assets, unless they are qualified as yields. In other words, the following requirements must be met:
In general, the amount of capital gains or losses will be as follows:
Capital gains/losses = Transfer value (net value of sales-related expenses) – Acquisition value (incorporating purchase-related expenses)
For taxation purposes, CGY is considered all profit or compensation, whatever their denomination or nature, of monetary nature or in kind, deriving directly or indirectly from capital gains yield and, in general, from assets or rights not classified as real estate but owned by the taxpayer and not related to economic activities carried out by the taxpayer.
These 3 main categories can be distinguished according to their source or origin:
The amount shall be determined according to the rate of yield in question. In general, for derivatives of holdings in institutions’ own funds and transfers of own capital to third parties:
RCM = Full income – Deductible expenses (*)
(*) Deductible expenses: only those administration and deposit of the shares or holdings expenses that represent the participation in an entities’ own funds, no other expense is admissible.
Amounts shall not be deductible if they are remunerations for discretionary management of an individual’s portfolio, where investments were made on behalf of the owner under a mandate provided by the owner.
Yes, let’s have a look at it on our graph.
The previous graph shows that the taxable base of savings will be constituted by the positive balance of adding the following balances:
These are the amounts deducted from your income that need to be paid to the tax national authorities as an “advance” on your tax liability. Not all financial products are subject to retentions. As a general rule, the retentions applied are on average 19% and must be correctly tailored in the document that supports the transaction.
The following is a link so you’re able to consult the practical instructions for the Spanish Tax Declaration in 2019 [Only available in Spanish].
At Faraday we provide our Partners with the best opportunities to invest in innovative and sustainable business initiatives in their early commercial stages. We structure and manage their investments, enhancing the performance of our investee companies and defend their interests throughout the entire investment cycle. We also work to provide the best legal and tax advice in support of our Partners.
Lucía Marinelli (Head of Finance and Administration)
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