These are the tax regulations that exist in relation to investment funds

Investment funds provide some significant tax-related advantages, which we will summarize below

Firstly, there are specific tax regulations that apply to investment funds, which are important to bear in mind when it comes to investing.

Shareholders in an investment fund are only taxed when these shares are redeemed. At this time, it can be determined whether positive or negative returns have been generated, along with the tax effects of capital gains or losses, and how these can be incorporated into the tax assessment base for savings on personal income tax (IRPF). Taxation is based on the following tax brackets:

  • Up to €6,000 - 19%
  • Between €6,000 and €50,000 - 21%
  • More than €50,000 - 23%
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In the Basque Country, the following percentages apply:

  • Up to €2,500 - 20%
  • Between €2,500 and €10,000 – 21%
  • Between €10,000 and €15,000 – 22%
  • Between €15,000 and €30,000 – 23%
  • More than €30,000 – 25%

And in Navarre:

  • Up to €6,000 – 20%
  • Between €6,000 and €24,000 – 24%
  • More than €24,000 – 27%

Tax regulations related to transfer of capital between investment funds

One of the major tax advantages of investment funds is that transfers between funds are exempt from tax. In other words, if you move your investment from one fund to another, you do not have to pay any tax on the earnings obtained up until that date (referred to as unrealized gains).

Offsetting of losses

As mentioned above, the money obtained when redeeming shares in an investment fund is considered as capital gains or losses. Incorporation and offsetting of the various components of the Tax Assessment Base for Savings was modified during the latest reforms made to Spain's Personal Income Tax legislation, which now reads as follows (art. 49 of the Personal Income Tax Act):

1. The returns from capital invested (e.g., interest from bank accounts, deposits, dividends, etc.) are incorporated into the tax assessment base for savings. If the returns obtained are negative, this amount will be offset using the positive balance declared for capital gains and losses in the other component of the tax assessment base for savings, but with the limit for this being 25 percent of this positive balance.

2. Capital gains and losses incorporated into the tax assessment base for savings (e.g., from the sale of investment funds, stocks, real estate, etc.) if the balance from incorporation and offsetting of these gains and losses is negative, this amount can be offset using the positive balance from the other component of the tax assessment base for savings (returns from investment capital), but with the limit for this being 25 percent of this positive balance.

3. In both cases, if there is still a negative balance after offsetting, this amount will be offset for the following four years.

Nevertheless, during 2015, 2016 and 2017, the compensation percentage will not be 25%, but rather 10, 15 and 20% respectively.

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Applicable deductions

When calculating the taxes to be paid in relation to investment funds, there are two costs that can be deducted: the costs associated with buying and selling. In other words, any additional costs you incurred when purchasing shares in the fund and/or fees deducted from the amount you received when selling shares in the fund, are deductible.
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