The term “tax relief” refers to a reduction of someone’s tax burden if they meet certain conditions. We’ll explain the most common forms of tax relief for individuals and businesses and what to do to benefit from them.
Taxes are a major way for governments to raise funds that pay for part of their operations and invest in healthcare, education, security, infrastructure and other public services. Tax collection involves special financial schemes so that every taxpayer pays taxes based on their financial, familial and personal circumstances — or pays less if they help achieve certain social, environmental or economic objectives. They are “tax credit” and "tax deduction".
In finance, tax relief “discounts” or “reduces”. It is, therefore, financial relief that subtracts an amount from the tax we’ll have to pay the government, regardless of whether we're employed by someone or self-employed. In general, tax law stipulates requirements we must satisfy before we can be entitled to a tax deduction. Because tax relief is regulated by law, we must provide relevant documents to justify them.
There are many types of tax relief, and individual taxpayers can claim ones that companies cannot (and vice versa). Often, governments set specific purposes for tax credits and deductions that can range from adapting a person's tax burden to their situation to promoting an economic, social or environmental agenda.
In Spain, the central and regional governments institute their own tax relief based on a person’s disability, large family status (with at least three children or other qualifying circumstance), pension plan and other aspects. Self-employed workers, SMEs and large companies can also get it as a means to promote job creation, investment in research and development (R&D) or the use of renewable energy.
As we can see, the list of tax credits and deductions is long. Below we’ll tell you about the most common ones.
Tax credits and deductions for individuals
At some point in the year, we tend to look back and think about the money we’ve earned from work, investment, or some other business; or about changes to our family, such as a newborn. Those things matter in order to benefit from the tax deductions available where we live.
The most common reasons individual taxpayers can get a tax deduction are:
While it is the most common reason for tax deductions, there are other deductions. Also, regional governments can improve on or add to national tax deductions.
A common question about deductions in Spain relates to home purchases. This article (in Spanish) by Openbank will tell you if you can deduct your mortgage.
Tax deductions for self-employed workers
In general, self-employed workers can obtain similar tax deductions, regardless of the country where they live. National and regional governments use these deductions to reduce the tax burden self-employed workers must cope with to do business. The most common deductions are:
Tax credits and deductions for companies
Tax relief for small and large companies generally aims to achieve goals that will benefit the community or the region where they operate. Governments can give it to companies for lowering the CO2 emissions from their operations, aiding employment and sustainable development and other things. In particular: