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Form 100. 2020 Personal Income Tax Return Declaration

7.1.4. Full performance reductions

As a general rule, full returns will be computed in their entirety, unless any of the following reductions apply:

  • Irregular returns: reduction of 30 percent

  • Benefits of certain social security systems: reduction of 30 percent

  • Reductions of the Transitional Regime: collective insurance, and certain social security systems

Reduction of 30 percent (Art. 18.2 Law)

A reduction of 30 per 100 will be applied to returns that have a generation period of more than two years and for which this reduction has not been applied within the five previous tax periods. , as well as those classified by regulation as obtained in a notoriously irregular manner over time when, in both cases, they are attributed in a single tax period.

The amount of the full income to which the reduction will be applied may not exceed the amount of 300,000 euros per year.

Without prejudice to the limit provided for in the previous paragraph, in the case of work income whose amount is between 700,000.01 and 1,000,000 euros and derives from the termination of the employment relationship, common or special, or the commercial relationship to which art refers. 17.2 of the Tax Law, or both, the amount of the yield to which the reduction will be applied may not exceed the amount resulting from reducing 300,000 euros in the difference between the amount of the yield and 700,000 euros.

When the amount of such returns is equal to or greater than 1,000,000 euros, the amount of the returns to which the 30 percent reduction will be applied will be zero .

When income from work with a generation period of more than two years is received in fractions, this 30 percent reduction will only be applicable in the event that the quotient resulting from dividing the number of years of generation, computed from date to date, , between the number of tax periods of fractionation, is greater than two (art. 10.2 Rgl.).

Work income from compensation for termination of the relationship with directors with a generation period of more than two years may apply the reduction when the quotient resulting from dividing the number of years of generation, computed from date to date, by the number of split tax periods is greater than two years, provided that the date of termination of the relationship is prior to August 1, 2014.

Purchase options on shares.

In the case of work income derived from the exercise of purchase options on shares or participations by workers that had been granted prior to January 1, 2015 and are exercised more than two years after their granting, if, in addition , were not granted annually, the 30 percent reduction may be applied, even if within the period of the five tax periods prior to the one in which they are exercised, the taxpayer had obtained other income with a generation period greater than two years to those who would have applied the reduction.

Income obtained in a notoriously irregular manner (art. 11 Rgl.)

Only the following are considered income from work obtained in a notoriously irregular manner over time, when they are attributed in a single tax period:

  • The amounts paid by the company to employees due to the transfer to another workplace that exceed the amounts exempt from tax.

  • Compensations derived from public Social Security or Passive Classes regimes, as well as benefits paid by Orphan Schools and similar Institutions, in cases of non-disabling injuries.

  • Benefits paid for non-disabling injuries or permanent disability, in any degree, by companies and by Public Entities.

  • Death benefits and funeral or burial expenses that exceed the exempt limit, for workers or officials, both those of a public nature and those paid by Orphan Schools and similar institutions, companies and by Public Entities.

  • The amounts paid in compensation or reparation for salary supplements, pensions or annuities of indefinite duration or for the modification of working conditions.

  • The amounts paid by the company to the workers for the mutual agreement resolution of the employment relationship. The generation period will be considered the number of years of service of the worker.

  • Literary, artistic or scientific awards that do not enjoy exemption from this Tax. For these purposes, economic benefits derived from the assignment of intellectual or industrial property rights or which replace them are not considered prizes.

Benefits of certain social security systems (art. 18.3 Law)

The benefits of the social security systems of article 17.2.a) 1 and 2 of the Tax Law, that is, those received by the Social Security systems, Passive Classes, General Mutual Funds for Civil Servants, Orphan Schools and other similar entities , will be reduced by 30 per 100 when received in the form of capital, provided that more than two years have passed since the first contribution. It is not necessary, however, for this period to elapse in the case of disability benefits. For the rest, we would have to apply the reductions of the following Transitional Regime:

Transitional regime reductions (DT 11 and 12 Law)

Transitional group insurance regime:

  1. Benefits derived from contingencies that occurred before January 1, 2007:

    The beneficiaries may apply the financial and tax regime in force on December 31, 2006.

  2. Benefits derived from contingencies that occurred after January 1, 2007 of group insurance contracted prior to January 20, 2006:

    The tax regime in force on December 31, 2006 may be applied. This regime will only be applicable to the part of the benefit corresponding to the premiums paid until December 31, 2006, as well as the ordinary premiums provided for in the original policy paid after this date.

However, collective insurance contracts that implement the externalization of pension commitments agreed in collective agreements at a supra-corporate level under the name "retirement awards" or others, which consist of a benefit payable only once at the time of termination for retirement, subscribed before December 31, 2006, may apply the tax regime provided for in section 2 above.

Transitional regime for pension plans, social security mutual societies and insured pension plans:

  1. Benefits derived from contingencies that occurred prior to January 1, 2007:

    The beneficiaries may apply the financial regime and, where appropriate, apply the reduction provided for in article 17 of the Consolidated Text of the Personal Income Tax Law in force on December 31, 2006.

  2. Benefits derived from contingencies that occurred after January 1, 2007, for the part corresponding to contributions made until December 31, 2006:

    The beneficiaries may apply the financial regime and, where appropriate, apply the reduction provided for in article 17 of the Consolidated Text of the Personal Income Tax Law in force on December 31, 2006.

As of January 1, 2015, a transitional period has been established to apply the 30 percent reduction, both for group insurance and social security systems:

  • For contingencies that occur after January 1, 2015, the reduction will only be applied to the benefit in the form of capital obtained in the year in which the corresponding contingency occurs, or in the two following years.

  • For contingencies that occurred in the years 2011 to 2014, the reduction will only be applied to the benefit in the form of capital obtained before the end of the eighth year following the one in which the corresponding contingency occurred.

  • For contingencies that occurred in 2010 or prior years, the reduction will only be applied to the benefit in the form of capital obtained until December 31, 2018.

Therefore, if the capital benefit is obtained after the indicated deadlines have expired, no reduction will be applied.

Benefits in the form of capital (art. 11.5 Rules)

These reductions are only applicable to benefits in the form of capital consisting of a single payment.

In the case of mixed benefits, which combine income of any type with a single payment in the form of capital, the aforementioned reductions will only be applicable to the payment made in the form of capital.