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Practical Income Manual 2020.

Limits and excess contributions

A. Maximum annual contributions that may give the right to reduce the tax base

Regulations: Additional Provision sixteenth Law Personal Income Tax

The total of the maximum annual contributions made to the social security systems, including, where applicable, those that have been charged by the promoters, which may give the right to reduce the general tax base may not exceed 8,000 euros , amount provided for in article 5.3 of the consolidated text of the Law regulating Pension Plans and Funds.

In this regard, keep in mind that article 5.3 of the consolidated text of the Law regulating Pension Plans and Funds was modified, with effect from January 1, 2015, by Final Provision One. One of Law 26/2014, of 27 of November, which modifies Law 35/2006, of November 28, on Personal Income Tax, the consolidated text of the Non-Resident Income Tax Law, approved by the Royal Legislative Decree 5/2004, of March 5, and other tax regulations ( BOE of 28).

Furthermore, for collective dependency insurance contracted by companies to cover pension commitments, an additional, independent, limit of 5,000 euros per year is established.

These limits will apply individually to each participant integrated into the family unit.

Failure by the participant to comply with the contribution limit, unless the excess of such limit is withdrawn before June 30 of the following year, will be sanctioned with a fine equivalent to 50 percent of said excess, without prejudice to the immediate withdrawal of the contribution limit. cited excess.

Exceptionally, the promoting company may make contributions to an employment pension plan of which it is the promoter when necessary to guarantee the current benefits or the rights of the participants of plans that include defined benefit schemes for retirement and have been established. manifest, through actuarial reviews, the existence of a deficit in the pension plan.

B. Excess contributions made and not reduced in previous years (except those derived from business contributions to group dependency insurance)

The contributions made to the social security systems, including the contributions imputed by the promoter, that could not have been reduced in the years 2015 to 2019 because they exceeded the maximum reduction limits fiscally established for this purpose, will be attributed to the current year, provided that they had been requested in the respective statements to be able to reduce the excess in the following five years.

The reduction of the excesses, which will be carried out subject to the maximum reduction limits discussed below, will be carried out with priority to that corresponding to the contributions made and contributions imputed in the year.

c. Joint Maximum Reduction Limit

  • In general

    The joint fiscal limit of reduction for contributions and contributions imputed by the promoter to the aforementioned social security systems, including, where applicable, the excesses pending reduction, from the years 2015 to 2019, is constituted by the lowest of the amounts following:

    a) 30 percent of the sum of the net income from work and economic activities received individually in the year.

    The concept of net income from work that must be taken into account to apply the aforementioned limit is that defined in article 19 of the Personal Income Tax Law , that is, the result of reducing the total income (including the reduction due to the application of the reduction in article 18) in the amount of deductible expenses.

    As regards the net income from economic activities, it is determined prior to the application of the reductions provided for in article 32 of the Personal Income Tax Law For these purposes, they will be included in the aforementioned sum the net income from economic activities attributed by entities under the income attribution regime, provided that the taxpayer participating or member of them effectively carries out the economic activity.

    b) 8,000 euros per year and, in addition, 5,000 euros per year for the collective long-term care insurance premiums paid by the company.

  • Particularities relating to severe or high dependency insurance

    It is worth distinguishing between private insurance and group insurance.

    - Private insurance: Without prejudice to the fact that they are subject to the previous maximum reduction limits, in the case of premiums paid to private insurance that cover the risk of severe dependency or great dependency, it must also be taken into account that all the reductions made by All persons who pay premiums in favor of the same taxpayer, including those of the taxpayer himself, may not exceed 8,000 euros per year, regardless of the age of the taxpayer and, where applicable, the age of the contributor.

    - Group insurance: The pension commitments assumed by companies, including the benefits incurred, may be implemented through collective dependency insurance contracts carried out in accordance with the provisions of the first Additional Provision of the consolidated text of the Law on the Regulation of Pension Plans and Funds. , approved by Royal Legislative Decree 1/2002, of November 29, in which the company will appear as the policyholder exclusively and the status of insured and beneficiary will correspond to the worker. In this case, the premiums paid by the company under these insurance contracts and attributed to the worker will have their own and independent reduction limit of 5,000 euros per year.

    Comment: The first Additional Provision of the consolidated text of the Law on the Regulation of Pension Plans and Funds approved by Royal Legislative Decree 1/2002, of November 29, was modified, with effect from September 4, 2018, by the first article of the Royal Decree-Law 11/2018, of August 31, transposing directives on the protection of pension commitments to workers, prevention of money laundering and entry and residence requirements for third-country nationals and by which Law 39/2015, of October 1, on the Common Administrative Procedure of Public Administrations is modified ( BOE of September 4).

D. Excess contributions and contributions corresponding to the year

Participants, mutualists or insured persons who have made contributions to social security systems may reduce the amounts contributed in the following five years, including, where applicable, the contributions of the promoter or those made by the company that have been attributed to them, that could not have been subject to a reduction in the tax base due to its insufficiency or due to application of the percentage limit of 30 percent of the sum of the net income from work and economic activities mentioned above .

Note: In no case may excesses that occur over the maximum limits provided for annual contributions be subject to reduction. Such excesses may be withdrawn before June 30 of the year following the contribution without penalty.

The excess that, in accordance with what has been indicated, should be applied in the following years will be imputed within the following five years, respecting the legally established limits mentioned above, even if the participant, mutual member or insured is already retired.

Note: the amounts corresponding to the excess contributions made and not reduced in the years 2015 to 2019 pending application at the beginning of the year, those applied in the declaration and the remainder pending application in future years as well as the contributions and contributions of 2020 not applied whose amount it is requested to be able to reduce in the following 5 years, must be recorded in Annex C.2 of the declaration, either in the section "Unreduced excess of contributions and contributions to social security systems (general regime) pending compensation in the following years (except those derived from business contributions to collective dependency insurance)", or in the section relating to "Unreduced excesses derived from business contributions to group dependency insurance pending compensation in the following years", as appropriate.