How to declare your investments to the Spanish tax authorities
Redacción Mapfre
As with every year at this time, filing the income tax return becomes a major concern for most Spaniards. Although it’s something we do every year, changes in personal circumstances and ongoing tax reforms often lead to questions and concerns.
This is especially true for investors, many of whom wonder how their financial products are taxed. For instance, the previous year’s income tax campaign didn’t bring any major changes, but the upcoming one will. These changes will affect the higher tax brackets, leading to a higher tax burden for investors with significant capital gains.
This article explains how to correctly declare investment funds and pension plans to the Tax Authorities.
Investment funds: Tax treatment
The first thing to understand about the taxation of investment funds is that they are exempt from taxes until a redemption occurs. In other words, taxes are only due when capital is withdrawn from the fund.
This tax feature means that even if you transfer money between funds throughout the year, there’s no need to declare it, as long as it’s done through a transfer. You’ll only need to declare it if you’ve made withdrawals. So, you can “switch” from one fund to another without triggering any tax obligations.
With that clarified, it’s important to note that investment funds are taxed as capital gains or losses within the savings income base. When selling shares, the gain or loss is calculated as the difference between the sale price and the acquisition price. In short, the tax authorities subtract any losses from your gains, and the result is taxed as savings income. This is reported in boxes 310 to 316 of the draft tax return.
| Performance | Applicable rate |
|---|---|
| Up to 6,000 euros | 19% |
| Between 6,000 and 50,000 euros | 21% |
| Between 50,000 and 200,000 euros | 23% |
| Between 200,000 and 300,000 euros | 27% |
| More than 300,000 euros | 28% (up to 30% in 2026) |
*Starting January 1, 2025, the highest tax rate for savings income—applied to earnings above 300,000 euros—will rise from 28% to 30%. However, this change will be reflected in the 2025 income tax return, which must be filed in 2026.*
Practical example of investment fund taxation
To better understand how investment funds are taxed, let’s consider an example.
An investor subscribed to a fixed-income investment fund six years ago with an initial contribution of 25,000 euros. After this period, they decide to fully redeem their investment. Given the performance of the fund, its final value is 35,000 euros, meaning the investor’s capital gain is 10,000 euros.
Since this gain is taxed as savings income, the investor will need to pay:
- 19% on the first 6,000 euros of the gain, amounting to 1,140 euros.
- 21% on the remaining 4,000 euros, which equals 840 euros.
In total, the tax on the investment fund will be 1,980 euros. So, the investor’s net capital gain after taxes will be 8,020 euros.
The importance of offsetting losses with gains
At this point, it’s essential to remind readers that gains can be offset by losses from previous years. In other words, if the current year’s gains from redeeming shares with capital gains can be reduced by losses declared in previous years, it will lessen the tax impact.
A useful tip for investors is to include all transactions in the income tax return, even those where no taxes were due because of losses. This strategy helps optimize the overall tax efficiency of the portfolio.
Pension plans: Reduction in the taxable base
Unlike investment funds, pension plans are taxed as employment income, not as savings income. Information on pension plan contributions is found in boxes 462 to 476 of the draft tax return. Specifically, pension contributions are listed in box 465.
This means that contributions to pension plans reduce the general taxable base for income tax, with a limit of 30% of income from employment and economic activities, or a maximum of 1,500 euros annually.
Practical example of pension plan taxation
Let’s say a taxpayer earned 30,000 euros from their job in a given year. During the year, they made a 3,000-euro contribution to their pension plan. As a result of this contribution, their taxable base for income tax is reduced to 27,000 euros. This reduction in the taxable amount results in a lower total tax liability, leading to potential tax savings.
How pension plans are taxed upon redemption:
From the perspective of the Tax Authorities, a pension plan functions as deferred salary. In other words, part of the income is set aside until retirement, allowing that amount to be deducted from the taxable base, reducing the tax burden in the process. However, when the time comes to redeem the pension funds, the amount will be considered employment income and must be declared in the income tax return, just like salary income.
Final tips for optimizing your tax return
Properly declaring your investments and pension plans can make a significant difference in the outcome of your tax return. With proper planning, you can optimize your tax burden and avoid potential penalties from the Tax Authorities.
- Plan withdrawals from funds and pension plans strategically to minimize tax impact.
- Take advantage of offsetting gains and losses to reduce your overall tax liability.
- Consult a tax advisor if you have specific questions about your situation. In this regard, MAPFRE Gestión Patrimonial has the best professionals to assist you.
