Example: contributions to social security systems

Mr. SMG, single, requested in his individual tax return Personal Income Tax , fiscal year 2019, to reduce in the following five fiscal years the excess of 2,000 euros from direct contributions and contributions imputed by the promoter to plans of pensions corresponding to the aforementioned year and not reduced in their declaration due to insufficient tax base.

In the 2020 financial year, the taxpayer has made contributions amounting to 1,000 euros to an employment system pension plan whose promoter is the company in which he works. For its part, the company has made a business contribution to the aforementioned plan in the amount of 3,500 euros and 2,000 to a collective dependency insurance contract that it contracted to implement the commitments assumed with its staff in the agreement.

Determine the reduction applicable for contributions to pension plans in fiscal year 2020, knowing that the taxpayer's net income from work amounts to 20,500 euros and that their general tax base is 18,600 euros.

Solution:

• General tax base: 18,600

• Reduction for contributions and contributions to pension plans:

Reduction of excesses 2019 ⁽¹⁾: - 2,000
Remaining tax base ⁽²⁾: 16,600
Reduction for contributions and contributions 2020 ⁽³⁾: -4,150
Contributions made (1,000 + 3,500 + 2,000) =6,500
Maximum limit: 4,150

- To the pension plan [4,150 x (1,000 + 3,500)] ÷ 6,500 = 2,873.08

- To the collective dependency insurance (4,150 x 2,000) ÷ 6,500 = 1,276.92
General liquidable base: 12,450
Exercise excesses 2020 ⁽⁴⁾: 2,350

Notes to the example:

⁽¹⁾When direct contributions and imputed contributions from the 2020 fiscal year itself coincide with excesses from the 2019 fiscal year, these must be applied first. The reduction can be made for its total amount (2,000 euros) without the need to distinguish direct contributions and imputed contributions.

The reducible amount does not exceed any of the reduction limits applicable in 2020, which are as follows: 6,150 euros (30 per 100 s/20,500, the latter amount being the sum of the net earnings from work received by the taxpayer in the year); 8,000 euros per year (maximum annual amount) and 18,600 euros (amount of the taxpayer's general tax base). ^(Back)

⁽²⁾Once the excess for fiscal year 2019 has been applied, the remainder of the general tax base must be determined, in order to make the corresponding reduction for the contributions and contributions to pension plans corresponding to fiscal year 2020. ^(Back)

⁽³⁾The maximum reduction limit is constituted by the lower of the following amounts:

30 percent on net income from work (30 percent s/20,500): 6,150 euros or
8,000 euros for contributions and contributions to the pension plan and additionally 5,000 euros for contributions to collective dependency insurance.

In this case the limit will be 6,150 euros. This limit is applicable to the entire excess for the 2019 financial year pending reduction and to the contributions and contributions for the 2020 financial year itself (including contributions to the collective long-term care insurance), so a reduction of 4,150 euros (6,150 euros) can only be applied to the latter. - 2,000 excesses from previous year).

To the extent that this last amount (4,150 euros) is less than the sum of the contributions made in 2020 to the pension plan and the collective dependency insurance (1,000 + 3,500 + 2,000 = 6,500), its amount must be distributed proportional to the amounts respectively contributed. ^(Back)

⁽⁴⁾The amount of the excesses for direct contributions and imputed contributions for the 2020 financial year amounts to 2,350 (6,500 - 4,150), of which 1,626.92 euros correspond to contributions and contributions to the pension plan in 2020 and 723.08 euros to the business contribution to group long-term care insurance in 2020 not applied, the amount of which may be reduced in the following five years, by completing the corresponding subsections of Annex C.2 of the declaration. ^(Back)