Economics

Define tax relief/Examples/explanation

Tax Relief

The reduction that is caused on the taxable base of a tribute is called tax relief, which is due to certain personal circumstances or economic incentives that are allocated to the taxpayer. Define tax relief

That is to say that, at the time of the accounting closing of a natural or legal person, certain benefits approved by the Law may arise that lead to the reduction of the tax quota of some taxes, referring to this as relief, benefiting the subject or company.

Taxes are generally applied on net income , that is, on the economic benefits that a natural or legal person has achieved as net income.

Therefore, to calculate the taxes to be paid, the income must be added in its entirety and deductible expenses must be subtracted from these, in order to calculate the corresponding taxes from the final amount. Define tax relief

However, sometimes people can deduct certain expenses from these taxes, such as the fee to a union or social security contributions, financial intermediaries, commissions paid to bank operations, among others.

For example, if we keep working for a company from home and for this we use the services of electricity, internet and telephone, then by law you may request that the taxes these expenses can be deducted because they are not consumed for personal use but by employment situation.

It is very important to clarify that the terms tax relief and deduction do not refer to the same concept despite being normally used as synonyms.

The deduction occurs when the tax rate of some taxes is reduced, that is, the natural or legal person is exonerated to pay said amounts, however, through the deduction, only a discount is applied to the amount of the tax rate of taxes. Define tax relief

Examples of tax relief.

  1. All those exemptions that are allowed to a legal or natural person in reference to certain tax quotas of some taxes are considered as relief , because it is considered that these have already been paid through another means.
  2. The deduction of certain taxes can be assigned due to the fact that payments were made to union dues, social security contributions or paid banking operations in relation to the purchase of a property.

It is important to know the difference between tax relief and deduction, because the first concept refers to the total discount of the tax quota, while the second refers to a partial discount of said payment.

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