6.2 Limits and excess contributions

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

Regulations: Art. 51.6 and Additional Provision sixteenth Law Personal Income Tax

• Maximum annual contributions (except for group dependency insurance)

  As of January 1, 2021, the set of maximum annual contributions made to 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 the amounts provided for in article 5.3 of the consolidated text of the Law regulating Pension Plans and Funds which, after the modification carried out therein by the twelfth Final Provision of Law 11/2020, of December 30, on the General State Budgets for the year 2021, are the following:

  • 2,000 euros annually for the total contributions and business contributions.

  • The previous limit is increased by an additional 8,000 euros , provided that such increase comes from business contributions.

  For the purposes of calculating this limit, the contributions that the individual entrepreneur makes to employment pension plans or social security mutual societies of which, in turn, he is a promoter and, in addition, a participant or mutual member, as well as those made to corporate social security plans or collective dependency insurance of which, in turn, you are the policyholder and insured , will be considered as corporate contributions .

  Income News 2021: The general limit applicable to the tax base of contributions and contributions to social security systems is reduced from 8,000 to 2,000 euros per year, although it is expected that the new limit may be increased by 8,000 euros for business contributions.

• Maximum annual contribution for group dependency insurance

Furthermore, for the premiums paid by the company under collective dependency insurance contracts contracted by it to cover pension commitments and attributed to the worker, an additional limit, specific and independent of the previous ones, 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 provided for in article 5.3 of the consolidated text of the Law regulating Pension Plans and Funds, unless the excess of such limit is withdrawn before June 30 of the following year, will be sanctioned with a fine equivalent to 50 percent of said excess, without prejudice to the immediate withdrawal of said 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. Joint Maximum Reduction Limit

Regulations: Art. 52.1 Law Personal Income Tax

• In general

  The joint maximum tax limit of reduction for contributions and contributions imputed by the promoter to the social security systems, including, where applicable, the excesses pending reduction, from the years 2016 to 2020, 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, the net income from economic activities attributed by entities under the income attribution regime will be included in the aforementioned sum, provided that the taxpayer participating or member of the same effectively carries out the economic activity.

  b) 2,000 euros per year.

  This limit is increased by 8,000 euros , provided that such increase comes from business contributions.

  The contributions that the individual entrepreneur makes to employment pension plans or social security mutual societies, of which, in turn, he is a promoter and participant or mutual member, as well as those made to corporate social security plans or collective insurance policies. dependence on those who, in turn, are the policyholder and insured, will be considered as business contributions, for the purposes of computing this limit.

  Therefore, for the contributions made by the individual entrepreneur to be considered as business contributions and included in the calculation of the limit of 8,000 euros, it will be necessary for the contributor to be both:

  1. In the case of contributions to a pension plan, promoter and participant.

  2. In the case of contributions to social security mutual societies, promoter and mutual member.

  3. In the case of corporate social security plans or collective dependency insurance, policyholder and insured.

  In addition, 5,000 euros annually 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 2,000 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).

C. Excess contributions made and not reduced in the years 2016 to 2020

Regulations: Art. 52.2 Law Personal Income Tax and transitional provision nineteenth Regulation

Contributions made to social security systems, including contributions charged by the promoter, that could not have been reduced in the years 2016 to 2020 due to insufficient tax base or exceeding the percentage limit of 30 percent of the sum of the income. net income from work and economic activities will be attributed to the current fiscal year, provided that it has been requested in the respective declarations to be able to reduce the excess in the following five fiscal years.

The reduction of the excesses from these years 2016 to 2020 will be carried out with priority to that corresponding to the contributions made and contributions imputed in the year and will be carried out subject to the maximum reduction limits indicated above.

Transitional regime for excess contributions to social security systems corresponding to the tax periods 2016 to 2020.

From January 1, 2021, the joint reduction limit for contributions and business contributions (except for business contributions to group long-term care insurance) is reduced to 2,000 euros, but is increased by 8,000 euros when it comes from business contributions. However, the excesses pending reduction as of January 1, 2021 were generated in years in which the reduction limit in the tax base for amounts contributed to social security systems did not distinguish between contributions made by the taxpayer and business contributions made by the taxpayer. promoter. For this reason, it is necessary to qualify the excesses from 2016 to 2020 and determine whether they correspond to taxpayer contributions or business contributions.

To this end, the Personal Income Tax Regulation establishes a transitional regime that allows, in the event that among the amounts pending reduction from the years 2016 to 2020, there are contributions made by the taxpayer and contributions imputed by the promoter to the systems. of social security, it is understood that the amounts pending reduction correspond to contributions imputed by the promoter, with the limit of the contributions imputed in said tax periods. The excess over said limit will be understood to correspond to contributions from the taxpayer.

D. Excess contributions and contributions corresponding to the year

Regulations: Arts. 52.2 Law Personal Income Tax and 51 Regulation

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 .

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 for both the maximum annual contributions to the social security systems (article 51 of the Personal Income Tax Law ) as well as for all the reductions to be applied to the tax base (article 52 of the Income Tax Law ), even if the participant, mutual member or insured is already retired.

From the 2021 period when the excess that occurs includes contributions from the taxpayer and contributions imputed by the promoter, the determination of the part of the excess that corresponds to both will be carried out in proportion to the amounts of the respective contributions and contributions.

Therefore , we must distinguish between excesses:

• A specific rule for excess contributions to social security systems corresponding to the tax periods 2016 to 2020 (transitional provision nineteenth of Regulation Personal Income Tax ) .

  This rule allows that, in the event that among the amounts pending reduction there are contributions made by the taxpayer and contributions imputed by the promoter to the social security systems in those years, it is understood that the amounts pending reduction correspond to imputed contributions by the promoter, with the limit of the contributions imputed in said tax periods. The excess over said limit will be understood to correspond to contributions from the taxpayer.

• A general rule applicable to excess contributions to social security systems that occur after fiscal year 2021.

  This rule establishes that when the excess that occurs includes contributions from the taxpayer and contributions imputed by the promoter, the determination of the part of the excess that corresponds to both will be carried out in proportion to the amounts of the respective contributions and contributions.

Note: the amounts corresponding to the excess contributions made and not reduced in the years 2016 to 2020 pending to be applied at the beginning of the year, those applied in the declaration and the remainder pending application in future years as well such as the contributions and contributions of 2021 not applied whose amount is requested to be reduced in the following 5 years, must be recorded in annexes C.2 and C.3 of the declaration, in one of the following sections, as appropriate: "Unreduced excess of contributions to social security systems (transitional regime) corresponding to the years 2016 to 2020 pending reduction ", "Unreduced excess of contributions to social security systems (transitional regime) corresponding to the years 2016 to 2020 pending reduction ", "Contributions to social security systems (general regime) corresponding to 2021, pending reduction in the following years", "Contributions to social security systems (general regime) corresponding to 2021, pending reduction in subsequent years" or in the section relating to "Unreduced excesses derived from business contributions to collective dependency insurance pending reduce in the following exercises".