State Tax Advantages for Investors: 2023 Tax Return

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March is coming to an end so is the deadline to file the Spanish income tax return. We are all wondering what we can do to benefit from tax breaks.

The deadline to file the Spanish income tax return is approximately two and a half months, starting on April 11 and ending on June 30. It represents a crucial moment of the year. We must be attentive to benefit from it.

Investments are among the options to deduct and reduce the amount to be taxed for Personal Income Tax in each fiscal year. For this reason, they have their particular space in the income tax return within the savings income.

When we invest in newly created companies, we must be aware that there is a state bonus of up to 50% of the capital contributed to buy shares, on a maximum annual amount of 100,000 euros. These tax benefits have been recently modified, namely in December 2022, when Law 28/2022 for promoting the ecosystem of startups, known as Startups Law, came into force.

To benefit from the bonus established in the Startups Law, both the company in which you invest and the investment itself must meet some requirements:

Requirements of the company you invest in

  • To have been founded in a period of fewer than three years.
  • Not be listed on the stock exchange, nor BME Growth (formerly MAB, Mercado Alternativo Bursátil).
  • To have a minimum of 400,000 euros of equity during the year in which shares are purchased.
  • The company must be incorporated under one of the following corporate forms: public limited company, private limited company, labor public limited company, or labor private limited company. Companies must comply with this requirement for all the years the investment is held.
  • The company must carry out economic activities, leaving out companies limited to managing financial assets and being mere investment vehicles.

Investment requirements

  • Your shares and those of second-degree relatives must be less than 40% of the company’s capital.
  • The investment money must come from a source other than the sale of shares of the same company in the previous year.
  • The amount of the participations acquired from the balance of the company-savings accounts does not form part of the deduction base if this balance has been subject to deduction.
  • Participation in the company must be made less than three years after its incorporation. The investment made must be maintained between 3 and 12 years.

Offsetting losses from previous years

Besides the state bonuses that can be obtained thanks to investing in start-up companies, we must consider other measures involving tax advantages in the income tax return.

Investors who have obtained returns in the current year but have investments devalued in previous years (implying losses in their results) can offset these losses, provided that they have occurred in the last four years, against this year’s earnings.

In order to achieve greater control of the risk-return ratio in your investments, it is essential to have a diversified portfolio. At Fellow Funders, we facilitate investment opportunities in start-ups that will impact your tax return. You can build a diversified investment portfolio with comprehensive transparency and rigor through our equity crowdfunding platform.

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