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Practical Income Manual 2020.

a) Benefits derived from social security systems

Among the benefits derived from social security systems that are considered work income are the following:

• Social Security and Passive Classes

Pensions and passive assets received from public Social Security schemes and passive classes are income from work, regardless of the person who has generated the right to receive them. Likewise, other public benefits for situations of disability, retirement, accident, illness, widowhood, or similar constitute income from work.

However, benefits received for absolute permanent disability or severe disability, pensions for uselessness or permanent disability of the passive class regime are declared exempt from Personal Income Tax , provided that the injury or illness disables the employee. recipient in full for any profession or trade, as well as the family benefits referred to in letter h) of article 7 of the Personal Income Tax Law .

Note: the Minimum Vital Income, as a non-contributory Social Security benefit in accordance with the provisions of article 2.2 of Royal Decree-Law 20/2020, of May 29, which establishes the minimum vital income ( BOE of July 1), will be considered performance of the work established in this section in the part that exceeds the exemption provided for in article 7.y) of the Personal Income Tax Law .

• General mandatory mutual funds for civil servants ( MUFACE , MUGEJU , ISFAS ), orphan schools and other entities Similar

The benefits received by the beneficiaries of the aforementioned mutual societies, orphan schools and other similar entities constitute income from work.

• Pension plans

Work income is the benefits received by the beneficiaries of the pension plans and those received from the pension plans regulated in Directive (EU) 2016/2341 of the European Parliament and of the Council, of December 14, 2016, relating to activities and the supervision of employment pension funds, whatever the contingency covered by them (retirement, total and permanent work incapacity for the usual profession or absolute and permanent for all work and great disability, severe dependency or great dependency and death of the participant or beneficiary).

This same consideration is maintained, regardless of the form of collection of said benefit: income, capital or in mixed form, income and capital.

The amounts received from the disposition of the consolidated rights of pension plans in the exceptional cases referred to in article 8.8 of the consolidated text of the Law on the Regulation of Pension Plans and Funds are also considered work income. (serious illness or long-term unemployment). These amounts will have the same tax treatment as pension plan benefits.

Attention: Please note that, as a consequence of the health crisis caused by Covid-19, the twentieth Additional Provision of Royal Decree-Law 11 /2020, of March 31, by which urgent complementary measures are adopted in the social and economic field to confront Covid-19 (BOE of April 1) and article 23 of Royal Decree-Law 15/2020, of April 21, of urgent complementary measures to support the economy and employment ( BOE of 22), established exceptionally and exclusively during the period between March 14 and March 14 September 2020, the possibility that pension plan participants could make effective their consolidated rights in certain cases of unemployment, cessation of activity or reduction in billing . Assumptions discussed in Chapter 13, within the common rules applicable to contributions to social security systems, in the section on early disposal of consolidated rights .

• Social security mutual societies

Income from work is the benefits received by the beneficiaries of insurance contracts concluded with social security mutual societies, regardless of the contingency covered by them (retirement, disability, death, severe dependency or great dependency and unemployment for working partners). , whose contributions may have been, at least in part, a deductible expense for determining the net income of economic activities (the mutual insurance company, in this case, acting as an alternative system to the special Social Security regime for self-employed or self-employed workers ) or object of reduction in the tax base of Personal Income Tax (the mutual insurance company, in this case, acting as complementary to the mandatory Social Security system).

Social security mutual societies are insurance entities that exercise a voluntary insurance modality complementary to the mandatory Social Security system, whose legal regulation is found in articles 43 et seq. of Law 20/2015, of July 14, on organization, supervision and solvency of insurance and reinsurance entities (BOE of July 15). The name of these entities must necessarily include the indication of "Social Welfare Mutuality". Due to their special fiscal relevance, among others, the professional mutual societies established by professional associations and the mutual societies that act as an instrument of corporate social security in favor of workers can be highlighted. See also the ninth Additional Provision of the Personal Income Tax Law .

The requirements that contributions must meet to be considered as deductible expense or as reduction in the tax base are discussed, respectively, in Chapters 7 and 13.

The integration into the tax base of the benefits received from Social Security Mutual Funds must be carried out, depending on the nature of the contingency covered, in accordance with the following criteria:

  1. Retirement or disability benefits

    These benefits are integrated into the recipient's tax base, as income from work, exclusively to the extent that their amount exceeds the contributions that have not been subject to reduction or reduction in the tax base for failing to comply with any of the subjective legal requirements. provided for this purpose.

    In the case of contributions made prior to January 1, 1999, when the amount of the contributions that could not be subject to reduction or reduction in the tax base cannot be proven, 75 percent of the retirement or disability benefits will be included. perceived.

    See in this regard the second transitional provision of the Personal Income Tax Law .

    Notwithstanding the above, benefits for permanent disability or major disability, received by professionals not included in the special Social Security regime for self-employed or self-employed workers, are exempt from Personal Income Tax . that derive from insurance contracts signed with social security mutual societies that act as alternatives to said Social Security regime, provided that they are benefits in situations identical to those provided for absolute permanent disability or major Social Security disability.

    See in this regard the exemption for "Benefits for absolute permanent disability or great disability received from Social Security or by the entities that replace it" in Chapter 2.

  2. Remaining benefits

    The remaining benefits, including those received due to death, are taxed as income from work in their entirety.

  3. Consolidated rights provision

    The early provision of economic rights of mutual members is possible in the same cases provided for pension plans. The amounts received for the early disposition, total or partial, of the consolidated rights are taxed as income from work.

• Corporate social security plans and other collective insurance contracts that implement the pension commitments assumed by companies.

The benefits received by the beneficiaries of corporate social security plans are in all cases considered income from work.

Keep in mind that the early provision of the economic rights of the insured in these cases is possible in the same cases provided for pension plans. For more information, the concept and requirements that corporate social security plans must meet are discussed in Chapter 13.

Likewise, the retirement and disability benefits received by the beneficiaries of collective insurance contracts, other than corporate social security plans, that implement the pension commitments assumed by companies, in the terms provided for in the first additional provision of the consolidated text of the Law regulating Pension Plans and Funds, and in its implementing regulations, they will be integrated as work income into the tax base to the extent that their amount exceeds the contributions imputed for tax purposes and the contributions directly made by the worker

Regarding the right of redemption in collective insurance contracts that implement the pension commitments assumed by companies, see the first Additional Provision of the Personal Income Tax Law . In addition, please also note that, in accordance with the first Additional Provision of the consolidated text of the Law on the Regulation of Pension Plans and Funds in the wording given by Law 27/2011, of August 1 (BOE of 2), Since January 1, 2013, collective dependency insurance has been accepted as insurance contracts suitable for implementing pension commitments assumed by companies. See the point related to dependency insurance in this same section.

The benefits received by the heirs as a result of the death of the insured worker do not constitute income from personal work as their receipt is subject to Inheritance and Donation Tax.

• Insured pension plans

The benefits received by the beneficiaries of the insured pension plans are in all cases considered income from work.

The concept and requirements of insured pension plans are discussed in Chapter 13.

• Dependency insurance

The benefits received by the beneficiaries of dependency insurance in accordance with the provisions of Law 39/2006, of December 14, on the Promotion of Personal Autonomy and Care for people in a situation of dependency, are considered income from work ( BOE of 15).