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 Sixteenth Additional Provision Law IRPF
-
Maximum annual contributions (except for collective dependency insurance)
As of January 1, 2022, the set of maximum annual contributions made in the year to the social security systems, including, where applicable, those that have been imputed by the promoters, which may give the right to reduce the general tax base may not exceed the following amounts:
-
General limit: 1,500 euros per year for the total of contributions and business contributions.
This general limit includes contributions from workers to both individual systems and to social security systems based on employment, without the need in the latter case to be conditional on the making of employer contributions.
-
Increase of the previous limit: 8,500 euros provided that this increase comes from employer contributions to employment systems or from employee contributions to the same employment system for an amount equal to or less than such employer contributions.
For these purposes, amounts contributed by the company that derive from a decision by the employee will be considered as contributions by the employee.
Therefore, this additional limit includes contributions from the worker to his or her employment system, but subject to the realization of employer contributions of at least the same amount and provided that the amounts contributed by the company do not derive from a decision by the worker (in which case they would be considered contributions from the worker and could not be included in this increase, unless there were sufficient employer contributions that did not derive from a decision by the worker).
The employee could therefore contribute a maximum of 4,250 euros per year to be included in this limit (half of the increase in the limit) provided that the company makes business contributions for another 4,250 euros. This would result in an increase in the maximum permitted limit of 8,500 euros.
Special rule for sole proprietors: For the purposes of calculating this limit, the individual entrepreneur's own contributions to employment pension plans or to social welfare mutual funds of which he is, in turn, the promoter and, in addition, a participant or mutual member, as well as those made to business social welfare plans of which he is, in turn, the policyholder and insured , will be considered as business contributions .
New Income Tax 2022: the general limit applicable to the taxable base of contributions to social security systems is reduced from 2,000 to 1,500 euros per year, and the additional increase in the previous limit is raised from 8,000 to 8,500 euros when the amounts come not only from employer contributions but also from employee contributions to the same social security instrument for an amount equal to or less than the respective employer contribution.
-
-
Maximum annual contribution for collective dependency insurance
In addition, for the premiums paid by the company under collective dependency insurance contracts contracted by it to cover pension commitments and imputed to the worker, an additional limit is established, independent of the previous ones, of 5,000 euros per year.
These limits will be applied individually to each participant in the family unit.
Exceptionally, the sponsoring company may make contributions to an occupational pension plan of which it is the promoter when necessary to guarantee the current benefits or the rights of the participants in plans that include defined benefit schemes for retirement and the existence of a deficit in the pension plan has been revealed through actuarial reviews.
Special rule for sole proprietors: For the purposes of calculating this limit, the individual entrepreneur's own contributions to collective dependency insurance of which he is, in turn, the policyholder and insured, will be considered as business contributions.
B. Joint maximum reduction limit
Regulations: Art. 52.1 Law Income Tax
-
In general
The maximum joint tax limit for reduction for contributions and contributions imputed by the promoter to the social security systems, including, where applicable, the excesses pending reduction, from the years 2017 to 2021, is constituted by the lowest of the following amounts:
a) 30 percent of the sum of the net income from work and economic activities received individually in the fiscal year.
The concept of net work performance that must be taken into account to apply the aforementioned limit is the one defined in article of the Income Tax Law, that is, the result of reducing the total performance (including the reduction by application of the reduction in article 18) by the amount of deductible expenses.
As regards the net income from economic activities it is that determined prior to the application of the reductions provided for in article 32 of the Income Tax Law. For these purposes, the net income from economic activities attributed by entities under an income attribution regime will be included in the aforementioned sum, provided that the participating taxpayer or member of said entities actually carries out the economic activity.
b) 1,500 euros per year.
This general limit is increased by 8,500 euros , provided that such increase comes from employer contributions or from employee contributions to the same social security instrument for an amount equal to or less than the respective employer contribution, taking into account the amount of employer contributions, made by several employers, to each of the social security systems individually.
For these purposes, amounts contributed by the company that derive from a decision by the employee will be considered as contributions by the employee.
-
The individual entrepreneur's own contributions to employment pension plans or to social welfare mutual funds, of which he is, in turn, a promoter and participant or mutual member, as well as those made to company social welfare plans of which he is, in turn, a policyholder and insured, will be considered as company contributions, for the purposes of calculating this limit.
Therefore, in order for the individual entrepreneur's own contributions to be considered as business contributions and included in the calculation of the limit of 8,500 euros, the contributor must be both:
-
In the case of contributions to pension plans, promoter and participant.
-
In the case of contributions to social security mutual societies, promoter and mutual member.
-
In the case of corporate social security plans, the policyholder and the insured.
In addition, 5,000 euros per year for the premiums for collective dependency insurance paid by the company.
The individual entrepreneur's own contributions to collective dependency insurance for which he is, in turn, the policyholder and insured, will be considered as employer contributions for the purposes of calculating this limit.
Note: Please note that the tax base cannot be negative as a result of the reductions, so the amount of the reduction must also be taken into account as a limit for the reduction.
-
-
Particularities relating to severe or highly dependent care insurance
A distinction must be made between private insurance and collective insurance.
- Private insurance: without prejudice to the fact that they are subject to the above maximum reduction limits, in the case of premiums paid to private insurance covering the risk of severe or great dependency, it must also be taken into account that the total reductions made by all persons who pay premiums in favour of the same taxpayer, including those of the taxpayer himself, may not exceed 1,500 euros per year, regardless of the age of the taxpayer and, where applicable, the age of the contributor.
- Collective insurance: Pension commitments assumed by companies, including accrued benefits, may be implemented through collective dependency insurance contracts made in accordance with the provisions of the First Additional Provision of the consolidated text of the Law on Regulation of Pension Plans and Funds, approved by Royal Legislative Decree 1/2002, of November 29, in which the company will appear exclusively as the policyholder 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 charged to the employee will have an 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 amended, with effect from September 4, 2018, by the first article of Royal Decree-Law 11/2018, of August 31, on the transposition of directives regarding the protection of pension commitments with workers, the prevention of money laundering and entry and residence requirements for nationals of third countries and which modifies Law 39/2015, of October 1, on the Common Administrative Procedure of Public Administrations ( BOE of September 4).
Income Tax Return 2022: The changes made to the reduction limits have led to a distinction being made in the section "Reductions for contributions to social security systems" of the personal income tax return between:
-
Worker contributions, except those recorded in boxes [0438] and [0426]. Box [0465]
-
Contributions made by the company that arise from a decision made by the employee. Box [ 0438]
-
Contributions by the employee to the employment pension plan, social welfare mutual fund or company social welfare plan, provided that company contributions have been made. Box [ 0426]
-
Business contributions to social security systems, except those made to collective dependency insurance and contributions from individual employers to social security systems. Box [ 0427]
-
Contributions from individual or professional employers to employment pension plans or to social welfare mutual funds, of which they are promoters and participants or mutual members, or to corporate social welfare plans or collective dependency insurance of which they are policyholders and insured. Box [ 0499]
-
Contributions to collective dependency insurance. Box [ 0466]
C. Excess contributions and contributions made and not reduced in previous years
Regulations: Articles 52.2 Law Income Tax ; art. 51 and nineteenth transitional provision Regulation IRPF
The amounts contributed by participants, mutual members or insured persons to social security systems, including those made by the promoter or the company that have been imputed to them that could not have been subject to reduction in the financial years 2017 to 2021 due to insufficient tax base or due to application of the percentage limit of 30% of the sum of net income from work and economic activities, will be imputed to the current financial year, provided that a request has been made in the respective declarations to be able to reduce the excess in the following five financial years.
The reduction of the excesses for the years 2017 to 2021 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.
Regarding the way of applying the excesses , for the year 2022, as a result of the new limits applicable to reductions for business contributions and contributions, the Personal Income Tax Regulations have been modified, with the intention of facilitating the application of the excesses pending reduction and mitigating their complexity. To this end, the proportional application of the excesses between contributions is eliminated, and the application of the increased maximum limit (1,500 + 8,500 euros) is permitted regardless of the origin of the amounts contributed, understanding that in the year in which they were paid, the maximum annual contributions were respected (article 51.6 and Sixteenth Additional Provision of the Personal Income Tax Law ).
On the other hand, excess amounts corresponding to premiums for collective dependency insurance will be charged within their own limit.
In the event that the limit of 30% of net income from work and economic activities or the amount of the general tax base does not allow the application of all contributions to social security systems and premiums to collective dependency insurance, the following procedure will be followed:
1. To calculate the applicable reduction, the maximum amounts that may be reduced for each of these concepts in each of the years will be determined, taking into account the amounts reduced by excesses from previous years, and that, for contributions and contributions to social security systems , the limit of letter b) of article 52.1 of the Personal Income Tax Law will operate for its total increased amount (1,500 + 8,500) without distinguishing the origin of the contributions, provided that in the period in which they were made they complied with the financial limit of the Sixteenth Additional Provision of the Personal Income Tax Law in the version that was in force in said period. The limit of 30% of net income from work and economic activities, or, ultimately, the amount of the general tax base, will operate as a global limit.
2. The amounts that can be reduced in each year will be applied in order of seniority and in the event that, for the same year, the total amounts cannot be reduced and contributions and employer contributions and premiums for collective dependency insurance concur in the same year, they may be reduced, firstly, the contributions and employer contributions.
Please note that although the possibility of reducing employer contributions and contributions first is established as this is the most beneficial option for the taxpayer, since there is a separate limit for collective dependency insurance, nothing prevents the taxpayer from applying the amounts corresponding to these premiums first.
Note: Please note that Article 1 of Royal Decree 1039/2022, of December 27 ( BOE of December 29) has modified Article 51 and the nineteenth transitional provision of the Personal Income Tax Regulation to facilitate the application of the excesses pending reduction and mitigate their complexity. To this end, the proportional application of excess amounts between contributions is eliminated, and the application of the increased maximum limit (1,500 + 8,500 euros) is permitted regardless of the origin of the amounts contributed, on the understanding that in the year in which they were paid, the maximum annual contributions were respected.
D. Excess contributions and contributions corresponding to the fiscal year
Regulations: Arts. 52.2 Law IRPF and 51 Regulation IRPF
As a result of the priority reduction of amounts outstanding from previous years, it is possible that not all of the amounts contributed in year can be reduced, including, where applicable, the promoter's contributions or those made by the company that have been attributed to them, due to insufficient tax base or due to application of the percentage limit of 30% of the sum of net income from work and economic activities mentioned above, generating an excess that can be carried over to future years.
This excess may be applied in the following five years respecting the total increased limit referred to in 52.1 of the Personal Income Tax Law (10,000), regardless of the origin of the amounts contributed, without including the additional limit applicable to the premiums for collective dependency insurance paid by the company.
Note: the amounts corresponding to the excess of contributions made and not reduced in the years 2017 to 2021 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 2022 not applied whose amount is requested to be able to reduce in the following 5 years, must be recorded in Annexes C.3 and C.4 of the declaration, in one of the following sections, as appropriate: "Unreduced excess of employer contributions and contributions to social security systems corresponding to the years 2017 to 2021 pending reduction except for employer contributions to collective dependency insurance", or in the section relating to "Unreduced excess derived from employer contributions to collective dependency insurance pending reduction in the following years".