TaxDown Secures €2.4 Million Seed Funding to Automate Tax Filing

Madrid-based TaxDown, a company specializing in automated income tax filing, has successfully raised €2.4 million, equivalent to approximately $3 million, in a seed funding round.

Investment Details and Backers

The funding round saw participation from previous investors, alongside a new addition to TaxDown’s investment board: US-based FJ Labs.

Notable investors include James Argalas (Presidio Union), Abac Nest – the venture capital arm of Abac – Baldomero Falcones, formerly Chairman at Mastercard, and the founders of Jobandtalent, Juan Urdiales and Felipe Navío.

Expansion Plans and Market Focus

Having served the Spanish market for the past three years, TaxDown is now setting its sights on international expansion.

Continued growth within its domestic market is also a key priority for the company.

Financial Performance and User Growth

In the previous year, TaxDown processed over €29 million in taxes for its users.

This resulted in savings exceeding €4 million for those individuals.

The company aims to reach 500,000 users in Spain this year.

International expansion is slated for the second half of 2021, with a focus on European and Latin American markets.

Proprietary Technology and Scalability

“Our initial goal was to simplify tax filing globally,” explains Enrique García, CEO and co-founder of TaxDown.

“To achieve this, we developed a unique software and tax language enabling tax professionals, without coding expertise, to translate tax laws into calculations our backend can seamlessly interpret.”

This innovative language facilitated a launch in Spain within four months, utilizing only one tax consultant.

TaxDown anticipates launching in new countries in approximately six months.

Simplifying the Tax Filing Process

García highlights the complexities of the Spanish tax filing system.

“Currently, taxpayers manually apply deductions when using the Spanish Tax Agency’s tool.

However, regional deductions vary across Spain, and many taxpayers are unaware of their eligibility, leading to lost savings.”

TaxDown leverages the Spanish Tax Agency’s API – with user authorization – to access over 2,000 data points.

The ‘RITA’ Algorithm and AI Integration

“Our algorithm, ‘RITA,’ analyzes user data, identifies the necessary questions – averaging nine from a database of over 3,000 – and accurately calculates the tax return, eliminating errors,” García states.

TaxDown is also integrating AI to provide its ‘taxers’ with guidance on minimizing future tax liabilities.

Furthermore, the company is developing live income tax simulations for users throughout the year.

Efficiency and Accuracy

Last year, TaxDown processed over 42,000 tax returns with a team of only two in-house tax experts.

This efficiency is attributed to proprietary internal tools, making the team “80x more efficient than the Spanish average.”

Further efficiency gains are expected through the implementation of a machine-learning tool that flags returns requiring review before submission.

TaxDown reports a perfect record of accurate filings, with its algorithms continuously testing and validating information with the authorities.

The technology also identifies discrepancies in real-time, allowing tax experts to manually review returns if needed.

Freemium Business Model

TaxDown currently employs a modified freemium model, charging users only if the calculated tax savings exceed €35.

User Motivation and Future Services

García notes that while savings are a key motivator, users also value reassurance and accuracy.

They seek a hassle-free, correct, and guaranteed tax filing experience, with access to expert help and protection in case of an audit.

Building on this user relationship, TaxDown plans to expand its services to include additional fintech offerings, such as financial advice.

Vision for the Future

“We believe tax data is a valuable asset, and we aim to provide our users with the best possible information,” says García.

“Our long-term vision is to become a trusted financial advisor, offering comprehensive financial guidance beyond just tax preparation.

We are well-positioned to connect our users with financial institutions.”

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