Tax time is approaching. As an investor, you are wondering how to include your shares and dividends obtained from your investments correctly and benefit from the state and regional deductions that we have already detailed in our previous articles:
State Tax Advantage for Investors: Tax Return 2023
Autonomous tax advantage for investors: Tax Return 2023
Am I obliged to file my income tax return?
First, you should know whether you are obliged to file a tax return. To do so, you must establish that it reflects the income obtained, that is to say, the result of the sale of shares, whether positive or negative, discounting the costs derived from the transaction.
Likewise, you should know that the income from investments, such as shares and dividends, are included in the savings taxable base, specifically in the section destined for the income from movable capital.
As a taxpayer, if you have sold shares from your investment portfolio, you are obliged to file a tax return if your savings income exceeds 1,600 euros gross per year from movable capital and/or capital gains. Another requirement is that this income has been subject to withholding or payment on account.
According to the Spanish Tax Agency, capital gains from transfers or reimbursements of shares or participations of collective investment institutions in which the withholding base should not be determined by the amount to be included in the taxable base are excluded from the joint limit of 1,600 euros per year.
Likewise, you are not obliged to present the investments in the tax return if you have obtained this income in individual or joint taxation:
- Total income from work, from movable or real estate capital, or economic activities and capital gains, whether or not subject to withholding, up to a joint maximum of 1,000 euros per year.
- Capital losses of less than 500 euros.
Taxation of profits and losses from your investments.
As mentioned, taxes on your investments are applied after the sale of the shares, which can be positive (capital gain or profit) or negative (capital loss or loss).
When you make a profit on the sale of shares, the taxation is carried out on the capital gain, not on the total sale price, i.e., if you invest 2,000 euros in the purchase of shares and obtain a total of 2,300 euros in their sale, the withholding tax applies on the difference between the amount from the shares sale and the amount invested in their purchase, and continuing with the same example: 300 euros.
You should also consider the success fee or commission that the purchase and sale of shares may involve. These amounts must be subtracted from the return on the sale. In the previous example, if the purchase of shares costs 25 euros and its sale of 25 euros, it would be necessary to subtract 50 euros from the amount that you will be taxed. Therefore, it will be 250 euros.
If the sale price is lower than the purchase price, the result will be negative, leading to losses. These losses can be compensated with the profits obtained from other shares. That is to say, if in the sale of some shares you have lost 600 euros. However, in another, if you have obtained a capital gain of 1,000 euros, you would be taxed on the difference, 400 euros.
In case the losses are higher than the profits obtained in share sale transactions, the corresponding withholding rate would not be applied to the savings tax base.
The savings tax base establishes the following brackets and rates, including the sale of shares and dividend yield, among others:
- Up to 6,000 euros of profit, the IRPF tax is 19%.
- Between 6,000 euros and 50,000 euros of profit, 21% is paid.
- Between 50,000 euros and 200,000 euros, the tax is 23%.
- Between 200,000 euros and 300,000 euros, the tax is 27%.
- From 300,000 euros, the tax rate is 28%.
Shares are the parts into which the capital of a company is divided. They are included in the savings tax base and form part of the income from movable capital.
The purchase of shares does not entail its declaration, it is at the moment of its sale when you must present the yield obtained from this operation in the income tax return.
Fellow Funders specializes in equity crowdfunding funding rounds, which involve the acquisition of shares of the company, i.e., shares. Therefore, you acquire shares of a company through a capital contribution. In this case, the shares obtained from the participation of the company are declared. Returns of capital by the investor, loans, and participation of companies in their liquidation are not to be declared.
Dividends are the distribution of a company’s profits to its investors, which implies that its results must have been positive. Each company establishes whether or not dividends are distributed. These are also included in the taxable savings base of the income tax return and are part of the income from movable capital.
Dividends may be taxed differently depending on how the company decides to distribute the profit:
- If it is in cash, it becomes part of the savings income. The form of taxation will be that of income from movable capital.
- If the distribution is in the form of new shares, it needs to be taxed as a share when sold.
Achieving greater control of the risk-return ratio in your investments requires designing a diversified portfolio. At Fellow Funders, we facilitate investment opportunities in startups that, as we have explained, will impact your tax return. Build your diversified investment portfolio with total transparency and rigor through our equity crowdfunding platform.