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Practical Income Manual 2020.

General scheme

The operations necessary to determine the amount of net income from work that is integrated into the tax base are represented in the following scheme:

Phase 1:

(+) Full amount accrued (monetary remuneration).

(+) Tax valuation plus non-passed-on account income (remuneration in kind).

(+) Business contributions to social security systems (imputed amounts).

(+) Contributions to the protected assets of people with disabilities.

(−) Reductions applicable to the following yields:

  • Generated within a period of more than two years.
  • Obtained in a notoriously irregular manner over time.
  • Benefits received from public social security schemes.
  • Benefits received from private social security systems (transitional regime).

(=) Full performance of work.

Phase 2:

(−) Deductible expenses:

  • Contributions to Social Security or mandatory mutual societies for civil servants.
  • Deductions for passive rights.
  • Contributions to orphan schools or similar institutions.
  • Fees paid to unions.
  • Fees paid to professional associations, if membership is mandatory.
  • Legal defense expenses in litigation with the employer.
  • Other expenses:

    1. Fixed amount applicable on a general basis. 2,000 euros
    2. Increase due to geographic mobility.
    3. Increase for active workers with disabilities.

(=) Net work performance.

Phase 3:

(−) Reduction for obtaining income from work (only for taxpayers with net income from work less than 16,825 euros and income other than work income that does not exceed 6,500 euros).

(=) Reduced net income from work.