How much you save with the cultural tax incentive: examples with figures
How much you save with the cultural tax incentive (Art. 39.7 LIS): worked examples by profile (large company, SME, self-employed) and how to calculate your own saving.
How much can you save with the cultural tax incentive? As a simple rule, the tax saving is around 20% of the amount contributed. A company that finances a certified cultural production with €50,000 applies a deduction of €60,000 to its liability (120% of the amount contributed) and, once the contribution is netted off (€50,000), saves €10,000 on its tax bill.
The mechanism is the same for companies (in Corporate Income Tax) and for the self-employed (in personal income tax), because the deduction regulated in Art. 39.7 of Law 27/2014 (LIS) applies to the gross tax liability of both taxes, by direct reference in the income tax legislation.
The actual saving in each case depends on the available liability and on the year's limits, so it is worth working it out with your adviser. Below we look at it with worked figures by profile, and how to estimate your own.
In this guide
- What is the saving formula, in simple terms?
- How much does a company save?
- How much does a self-employed person save?
- What assumptions and limits should you bear in mind?
- How do I work out my own saving?
- Frequently asked questions
What is the saving formula, in simple terms?
The mechanics start with a cultural project that generates a deduction through its spending and passes the surplus on to whoever finances it:
- The project generates the deduction: a certified cultural production incurs costs which, if they meet the requirements, generate a tax deduction. The production company applies it as far as its own liability allows and passes on to a financier the portion it cannot apply.
- Contribution: the amount you contribute as a financier to that project, through a financing contract, in exchange for applying the deduction passed on to you.
- Deduction from the liability: up to 120% of the amount contributed (1.20×).
- Net tax saving: the deduction minus the amount contributed, that is, around 20% of the contribution.
In one line: net saving ≈ 20% × the amount contributed. The deduction applies to the tax liability (Corporate Income Tax for companies, personal income tax for the self-employed), not to the taxable base, so the effect does not depend on the rate at which you are taxed but on having enough liability. Official source for the legal framework: Corporate Income Tax Act (BOE). The detail of the mechanism is in the cultural tax incentive guide.
How much does a company save?
Two common cases: a large company with a high Corporate Income Tax liability, and an SME with enough liability to pay:
| Profile | Gross tax liability* | Contributes | Deduction from liability (120%) | Net tax saving (~20%) |
|---|---|---|---|---|
| Large company | €240,000 | €100,000 | €120,000 | ~€20,000 |
| SME with enough liability | €60,000 | €25,000 | €30,000 | ~€5,000 |
| Minimum contribution | €12,000 | €5,000 | €6,000 | ~€1,000 |
*The gross tax liability is the result of applying the tax rate to the taxable base. Deductions are then applied to it to arrive at the final net liability on your return, together with any instalment payments already made; and if, once the deduction is applied, the net or differential liability so allows, claiming a refund from the tax authorities is not ruled out.
In every case the net saving is the 1.20× differential on the amount contributed. The company must have enough liability: the limit is 50% of the gross tax liability when the deduction exceeds 10% of the liability, which is the usual case; it only stays at 25% if it does not. More context in how a profitable company pays less Corporate Income Tax.
How much does a self-employed person save?
For a self-employed person under the direct assessment regime with an income tax liability, the calculation is identical, applied to their income tax:
| Profile | Gross tax liability* | Contributes | Deduction from liability (120%) | Net tax saving (~20%) |
|---|---|---|---|---|
| Self-employed, top bracket | €24,000 | €10,000 | €12,000 | ~€2,000 |
| Self-employed (minimum ticket) | €12,000 | €5,000 | €6,000 | ~€1,000 |
*The gross tax liability is the result of applying the tax rate to the taxable base corresponding to the business and professional income declared by the self-employed person.
The detail for this profile is in how a self-employed person with a liability to pay pays less tax.
What assumptions and limits should you bear in mind?
The figures in the tables are indicative and rounded to explain the mechanics. The actual saving in each case depends on these assumptions:
| Parameter | Current figure |
|---|---|
| Financier's deduction | Up to 120% of the amount contributed (1.20×) |
| Tax saving on the amount contributed | ~20% |
| Limit on the gross tax liability | 50% of the gross tax liability (the usual case); 25% only if the deduction does not exceed 10% of the liability |
| Unapplied excess | Up to 15 following tax years |
| Requirement | Tax residence in Spain and enough liability |
| Minimum contribution with Hulahoop | From €5,000 |
The underlying requirement is having a liability to pay: the deduction reduces a tax you already owe, it does not generate a refund on its own. If the year's liability is low, the unapplied portion is carried forward for up to 15 following tax years, so it is not lost.
How do I work out my own saving?
For a quick estimate: multiply what you would consider contributing by 0.20 and you have the approximate net saving. For example, €40,000 × 0.20 ≈ €8,000 of net saving, with a deduction from the liability of €48,000 (120%). Remember to check that your liability for the year can absorb that deduction within the limit of 50% of the gross tax liability when the deduction exceeds 10% of the liability, which is the usual case; it only stays at 25% if it does not.
To fine-tune it against your own liability, use our calculator and validate the result with your adviser before deciding.