The annual tax return, or Declaracion de Renta, is due by the 30th of June each year.
As a couple, you may want to investigate your options by calculating the refund or balance due if filing as an individual, jointly or as a family unit.
As long as you’re both eligible to pay the tax concerned, we can do the maths and help you choose the best option for your situation.
For the purposes of Personal Income Tax, there are two types of family unit.
Married couples
In this case, the family unit consists of two not legally separated spouses and may also include:
- children under the legal age of 18, except for those who are living independently
- children of legal age (18 or above) who are legally incapacitated and therefore under extended or renewed parental authority.
Common law couples and legally separated spouses
In this case, the family unit is formed by the mother or the father and all the children who live with one or other of them including:
- children under the legal age of 18, except for those who are living independently
- children of legal age (18 or above) who are legally incapacitated and therefore under extended or renewed parental authority.
In common-law couples, only one parent (father or mother) can form a family unit with the children who meet the requirements mentioned above and, as a result, opt for joint taxation.
The other member of the couple must declare individually.
The same criteria apply if you’re separated or divorced with shared custody.
What else do I need to know?
Although today’s families can be diverse, any family group which does not fall into the above two categories is not recognized as a unit for the purposes of declaring your annual income tax.
No one can form part of two family units at the same time for tax purposes.
It’s also important to know that membership of the family unit is determined by the situation on the 31st of December every year.
What does that mean? Well, if a child turns 18 during the year, becoming above legal age, he or she will no longer form part of the family unit in that tax period because by the the 31st of December, they will be exempt.
This also means that any member of the family unit who dies during the year will also be exempt.
This is easy to follow because remember, we declare the personal tax returns in the following year.
What happens once we decide to declare jointly?
If you choose to make a joint tax declaration, the income of all members of the family unit must be included in the tax return, even if they aren’t obliged to present one because they earn under the minimum amount.
Joint tax payment links all members of the family unit, or both halves of the couple. That means if either of you presents an individual tax return, the other must do the same.
Once you’ve made the declaration jointly or as an individual, you can only change it if you file a new tax return within the period for voluntary filing of tax returns (before the 30th of June).
After this period, you can’t change until the following year.
When you declare jointly, the amounts and limits established for individual taxation will be applied in identical amounts for each of you, without increasing or multiplying according to the number of people in your family unit.
However, the maximum reductions allowed for social security contributions and protected assets of disabled family members will be individually applied to each one of you.
Minimum personal amount.
In any type of family unit, the minimum amount you can earn tax-free is 5,550€ per year, per tax payer. This is irrespective of the number of members in your family unit.
We’ll calculate any increases due to age or disability based on each of your or your partner’s individual circumstances.
Other conditions can apply and we’ll happily talk them over with you during your appointment, to help you choose the best option.
