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How can you pay less income tax on the loss of value of the shares?

Value of shares

One of the most effective ways of saving is the one that can be done through the income tax return. It will allow you to pay taxes only for the real benefits you had for your investment. In this way, you take advantage of the losses when selling below the value of the shares to reduce your tax burden. Do you want to know how this is possible? I invite you to stay with us until the end to find out all about it. Here we go!

How can you offset savings income against the loss in value of the shares?

This form gives you the possibility to offset savings income, especially when it comes to capital gains and losses. So that you only pay for the real profits generated by your investment.

In other words, what happens is that the money you have lost with an investment will be subtracted from what you have earned. Thus, you will only be taxed on the difference between the two.

One possible situation is that if the value of the shares is lower at the moment of selling them, you will be able to pay tax on the capital assets that have left you with a gain.

The important thing is to know if there are gains or losses. If so, you only have to calculate according to the general rule of Hacienda the purchase or sale of something. And how would you do it? By following the formulas below: 

Value of shares

You can apply this scheme whether you are selling or buying because of the low value of the shares and real estate. That way, Hacienda will be aware that you are selling or acquiring something.

You may also be interested in: What is the NIF in Spain and how to obtain it?

Losses and gains that can be offset in the IRPF

Gains and losses of each investment product can be offset. In the case of losses, you can compensate them with another product of the same category. They can be income from movable capital or capital gains and losses.

Both capital gains and losses are made up of almost all investments, ranging from investments in the stock market to the sale of your home. 

Facilitating the possibility of offsetting these capital gains with the income from real estate capital with a maximum of 25%.

In this way, you will be able to compensate the loss produced by the deduction of the value of the shares in your possession with any other type of equity investment you own. 

What are the exceptions that cannot be offset? 

Almost all annuities operate under the same rule. However, you will always find some exceptions when it comes to investing or compensating your investment.

Value of shares

How to save on your personal income tax return with the sales of your shares?

If you sell shares that are trading below their purchase price, you will be able to record a loss in your personal income tax return. This registration will allow you to save and not lose money due to the low value of the shares. Of course, everything will depend on the case in which the sale was made.

  • If you executed a sale of shares or other assets that have brought you a profit, in this case the losses incurred will be compensated with such profit. Saving 19 to 26% of the amount to be compensated.
  • If after the compensation the balance is still negative, you will still be able to obtain savings. You will be able to offset the negative balance with certain positive income from savings, such as interest on loans or dividends. In these cases there may be a limit of up to 25% of such positive income.
  • Even after the interest remains in negative balance, you can compensate it in the following four years. It is very likely that in that time you will obtain some positive gain or income that can compensate the negative balance and that, in addition, will help you to achieve savings.

You may also be interested in: Form 036 and 037: registering with the Tax Authorities

What is the taxation of the different income from shares?

It is very important to know which are the different incomes that your actions can generate and to specify them when making the tax return so that you can compensate them correctly.

On the one hand, there is the implicit income, which is produced when the financial product is sold. Thus, the sale of a share enters the savings base as a capital gain or loss depending on the amount obtained.

On the other hand, the explicit income contains the benefits or interest produced by the financial product when it is held in the portfolio. In the case of shares, the dividend you receive is included in the savings base as income from movable capital.

Remember not to repurchase shares

To compensate for the damage done to your finances by selling below the value of the shares in your portfolio, you must be clear that you cannot buy shares of the same company within two months before or after the transfer. 

The Treasury established this rule in order to prevent fictitious sales from being made to offset such loss.

It is therefore recommended that after the sale you buy shares of another company or wait for the 2 months to elapse and buy back the shares of the same company. 

How long is it possible to reward loss?

If you lost financially due to the decrease in the value of the shares in your position, you will have the possibility to offset the loss with the profit generated by other investments over a longer period of time.

The Internal Revenue Service allows you to offset losses against gains during the following four years from the time they occur. This means that you have four opportunities to reduce your debt. 

This will make it possible for you to offset the loss of previous years in 2023 and, in this way, gradually pay off your debt with the tax authorities.

You may also be interested in: What’s new in the Personal Income Tax return in Spain?

Do you want to save on your income tax by selling your shares? This method may be the option for you. To find out how to do it I invite you to contact us at TAS Consulting through our email and ask for your free advice. We have the best professionals who will provide you with all the information you need.

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