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Practical Income Manual 2022.

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, 2022, the total of the maximum annual contributions made in the year to the social security systems, including, where appropriate, those that have been attributed by the promoters, which may give the right to reduce the base general taxable amount 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 the worker's contributions to both individual systems and the employment social security system, without the need in the latter case to be conditioned on making company contributions. 

    • Increase of the previous limit: 8,500 euros provided that this increase comes from business contributions to employment systems or from worker contributions to the same employment system for an amount equal to or less than such business contributions.

      For these purposes, the amounts contributed by the company that derive from a decision by the worker will be considered contributions by the worker.

      Therefore, this additional limit includes the worker's contributions to his or her employment system, but conditional on making business 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 business contributions that did not derive from a decision by the worker).

      Therefore, the worker could contribute a maximum of 4,250 euros per year to be included in this limit (half of the increase in the limit) as long as the company makes business contributions of another 4,250 euros. This would lead to an increase in the maximum allowed limit of 8,500 euros.

    Special rule for individual entrepreneurs: 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 of which, in turn, the policyholder and insured are considered, they will be considered business contributions .

    Income News 2022: The general limit applicable to the tax base of contributions and 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 business contributions. but also of worker contributions to the same social security instrument for an amount equal to or less than the respective business contribution.

  • 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.

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.

Special rule for individual entrepreneurs: For the purposes of calculating this limit, the contributions that the individual entrepreneur makes to collective dependency insurance of which, in turn, he is the policyholder and insured, will be considered as business contributions.

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 2017 to 2021, 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) 1,500 euros per year.

    This general limit is increased by 8,500 euros , provided that such increase comes from business contributions or from worker contributions to the same social security instrument for an amount equal to or less than the respective business contribution, taking into consideration the amount of business contributions, made where appropriate by several employers, to each of the social security systems individually.

    For these purposes, the amounts contributed by the company that derive from a decision by the worker will be considered contributions by the worker.

  • 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 of which, in turn, whether the policyholder and the insured, will be considered as business contributions, for the purposes of calculating 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 8,500 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, policyholder and insured social security plans.

    In addition, 5,000 euros annually for the collective long-term care insurance premiums paid by the company.

    The contributions that the individual entrepreneur makes to collective dependency insurance of which, in turn, he is the policyholder and insured, will be considered as business contributions, for the purposes of calculating this limit.

    Note: Keep in mind that the tax base cannot be negative as a result of the reductions, so the amount of the same must also be taken into account as a limit of the reduction.

  • 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 1,500 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).

Income Tax Declaration 2022: The modifications made to the reduction limits have given rise to distinguishing in the section "Reductions for contributions and contributions to social security systems" of the personal income tax return between:

  • Worker contributions, except those entered in boxes [0438] and [0426]. Box [0465]

  • Contributions made by the company that derive from a decision of the worker. Box [ 0438]

  • Worker contributions to the employment pension plan, social security mutual fund or business social security plan, provided that business contributions have been made. Box [ 0426]

  • Business contributions to social security systems, except those made to collective dependency insurance and contributions by individual entrepreneurs to social security systems. Box [ 0427]

  • Contributions from individual entrepreneurs or professionals to employment pension plans or social security mutual societies, of which they are a promoter and participant or mutual member, or to corporate social security plans or collective dependency insurance of which they are a policyholder 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 Personal Income Tax ; art. 51 and transitional provision nineteenth Regulation Personal Income Tax

The amounts contributed by participants, mutual members or insured to social security systems, including those made by the promoter or by the company that had been attributed to them that could not have been subject to reduction in the years 2017 to 2021 due to insufficient tax base or due to application of the percentage limit of 30 percent of the sum of the net income from work and economic activities, will be attributed to the current year, provided that it has been requested in the respective statements to be able to reduce the excess in the following five years.

The reduction of the excesses from these 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 previously.

Regarding the way of applying the excesses , for the 2022 financial year, as a consequence 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 excesses between contributions or contributions is eliminated, and the application of the increased maximum limit (1,500 + 8,500 euros) is allowed regardless of the origin of the amounts contributed, understanding that in the year in which who would have paid respected the maximum annual contributions (article 51.6 and Additional Provision sixteen of the Personal Income Tax Law ).

On the other hand, the excesses corresponding to the collective dependency insurance premiums will be allocated respecting their own limit.

In the event that the limit of 30 percent of the 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 insurance premiums dependency groups, the following procedure will be followed:

1. To calculate the applicable reduction, the maximum amounts that can be reduced for each of these concepts in each of the years will be determined, taking into account the amounts reduced due to 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 increased total amount (1,500 + 8,500) without distinguish 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 wording that was in force in said period. The limit of 30 percent of the net income from work and economic activities, or, ultimately, the amount of the general tax base, will operate as a global limit.

2. The reducible amounts will be applied in order of seniority in each of the years and in the event that, for the same year, all of the amounts could not be reduced and business contributions and premiums for collective dependency insurance apply in the same year. , may be reduced, in the first place, business contributions and contributions.

Keep in mind that although the possibility of first reducing business contributions and contributions is established as it is the most beneficial option for the taxpayer, since for collective dependency insurance there is its own limit, nothing prevents the taxpayer from applying the amounts corresponding to these premiums.

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 Regulation IRPF ##2##to facilitate the application of excesses pending reduction and mitigate their complexity. To this end, the proportional application of excesses between contributions or contributions is eliminated, and the application of the increased maximum limit (1,500 + 8,500 euros) is allowed regardless of the origin of the amounts contributed, understanding that in the year in which would have paid respected the maximum annual contributions. 

D. Excess contributions and contributions corresponding to the year

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

As a result of the priority reduction of pending amounts 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 carried out by the company that have been attributed to them, due to insufficient tax base or due to application of the percentage limit of 30 percent of the sum of the net income from work and economic activities previously mentioned, generating an excess that can be transferred to future years.

Said 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 group long-term care insurance premiums paid by the company. 

Note: the amounts corresponding to the excess contributions made and not reduced in the years 2017 to 2021 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 2022 not applied whose amount is requested to be reduced 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 business contributions and contributions to social security systems corresponding to the years 2017 to 2021 pending reduction except for business contributions to collective dependency insurance", or in the section relating to "Excess not reduced derived from business contributions to collective dependency insurance pending reduction in subsequent years".