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Practical Income Manual 2023.

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, 2023, 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 employment social security systems, without the need in the latter case to be conditioned on making company contributions. 

    • Increase of the previous limit:

      It is necessary to distinguish:

      1. Increase for business contributions and worker contributions to the same social security system: 8,500 euros

        The worker's contributions must be for an amount equal to or less than the amounts resulting from the following table based on the full performance that the worker receives from the employer who makes the contributions and the annual amount of the business contribution:

        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.

        Full work performance of the worker (*) Annual amount of business contribution (**) Maximum employee contribution (***)
        Full income from work equal to or less than 60,000 euros Equal or less than 500 euros. The result of multiplying the business contribution by 2.5.
        Between 500.01 and 1,500 euros. 1,250 euros, plus the result of multiplying by 0.25 the difference between the business contribution and 500 euros.
        More than 1,500 euros. The result of multiplying the business contribution by 1.
        Full income from work greater than 60,000 euros Any amount The result of multiplying the business contribution by 1.

        Notes to table :

        (*) It is not necessary to consider the total full returns received by the worker, but rather the full returns that come from each employer that makes the contribution .

        (**) Contributions to different social security systems by the same employer : The amount of business contributions made by each employer to each of the social security systems individually must be taken into consideration, without it being necessary to add business contributions for these purposes.

        Contributions to the same social security system by different employers: The contributions made by each of the employers individually must be taken into consideration.

        (***) The contributions must be related to the contributions made to the same social security system.

        The amounts contributed by the company that derive from a decision by the worker will be considered contributions by the worker.

        Note: The company that makes the contribution must inform the managing entity or insurer of the social security instrument, with respect to each of its workers, that the circumstance does not arise that the worker obtains full income from work in the year exceeding 60,000 euros from of the company.

      2. Increase due to contributions from self-employed/self-employed workers: 4,250 euros

        It must be one of the following contributions:

        • Contributions to the sectoral pension plans provided for in article 67.1.a) of the consolidated text of the Law on the Regulation of Pension Plans and Funds, made by self-employed or self-employed workers who adhere to said plans due to their activity.

          These are the employment pension plans promoted by companies included in sectoral collective agreements that implement pension commitments in favor of their workers, with special attention to promoting their implementation in small and medium-sized companies.

        • Contributions to the simplified employment pension plans for self-employed or self-employed workers provided for in article 67.1.c) of the consolidated text of the Law on the Regulation of Pension Plans and Funds;

          They are the pension plans for self-employed or self-employed workers, promoted by associations, federations, confederations or unions of associations of self-employed or self-employed workers, by unions, by professional associations or by social security mutual societies, in which their Participating persons are exclusively self-employed or self-employed persons. The prior condition of membership will not be required for the participant who wishes to join a plan promoted by an association of self-employed or self-employed workers.

        • Own contributions that the individual entrepreneur or professional makes to employment pension plans, of which he is a promoter and, in addition, a participant.

        • Own contributions that the individual entrepreneur or professional makes to Social Security Mutuals of which he is a mutual member.

        • Own contributions that the individual entrepreneur or professional makes to corporate social security plans or collective dependency insurance of which, in turn, he or she is the policyholder and insured.

    Note: In any case, the maximum amount of reduction due to the application of the increases provided for in numbers 1 and 2 above will be 8,500 euros per year.

  • 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 in the tax base

Regulations: Art. 52.1 Law Personal Income Tax

  1. In general

    The joint maximum tax limit of reduction to be applied to the tax base for contributions and contributions imputed by the promoter to the social security systems, including, where applicable, the excesses pending reduction, from the years 2018 to 2022, is constituted by the smaller of the following quantities:

    1. 30% of the sum of net earnings from work and economic activities received individually during the fiscal 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.

    2. 1,500 euros per year

      This limit will be increased in the following cases, in the amounts indicated:

      1. In 8,500 euros per year , 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 amounts resulting from the following table, depending on the full performance received by the worker from the employer who makes the contributions and the annual amount of the business contribution:

      Full work performance of the worker  Annual amount of business contribution Maximum employee contribution
      Full income from work equal to or less than 60,000 euros Equal or less than 500 euros. The result of multiplying the business contribution by 2.5.
      Between 500.01 and 1,500 euros. 1,250 euros, plus the result of multiplying by 0.25 the difference between the business contribution and 500 euros.
      More than 1,500 euros. The result of multiplying the business contribution by 1.
      Full income from work greater than 60,000 euros Any amount The result of multiplying the business contribution by 1.

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

      2. In 4,250 euros per year , provided that such increase comes from any of the following contributions:

      • Contributions to sectoral employment pension plans provided for in article 67.1.a) of the consolidated text of the Law on the Regulation of Pension Plans and Funds, made by self-employed workers or Self-employed workers who adhere to said plans due to their activity.

      • Contributions to the simplified employment pension plans of self-employed or self-employed workers provided for in article 67.1 c) of the consolidated text of the Law on the Regulation of Pension Plans and Funds.

      • Own contributions that the individual entrepreneur or professional makes to employment pension plans , of which he is a promoter and, in addition, a participant.

      • Own contributions that the individual entrepreneur or professional makes to Social Security Mutual of which he is a mutual member.

      • Own contributions that the individual entrepreneur or professional makes to corporate social security plans .

      Remember: In any case, the maximum amount of reduction due to the application of the increases provided for in numbers 1 and 2 above will be 8,500 euros per year.

      3. 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.

    Note: pan-European individual pension products

    To the pan-European individual pension products regulated by Regulation ( EU ) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-European individual pension product, The treatment that corresponds to pension plans will apply to them in Personal Income Tax .

    In particular, the s contributions of the saver to the pan-European individual pension products may reduce the general tax base in the same terms as those made to the pension plans and will be included in the joint maximum limit provided for in the article 52 of the Personal Income Tax Law for social security systems.

  2. 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 2023: In the section "Reductions for contributions and contributions to social security systems" of the personal income tax return, a distinction is made 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 self-employed or self-employed workers, individual entrepreneurs or professionals. 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 2018 to 2022 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 2018 to 2022 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 that were previously indicated.

    Regarding the way of applying the excesses the Personal Income Tax Regulations allow the application of the increased maximum limit (1,500 + 8,500 euros) regardless of the origin of the amounts contributed, understanding that in the year in which they had been paid, they 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 applying all of the contributions and contributions to social security systems and premiums for collective dependency insurance, the following procedure will be followed:

    1. To calculate the applicable reduction, the maximum amounts that can be reduced for each of these concepts will be determined (that is, on the one hand, for contributions and contributions to social security systems and, on the other, collective dependency insurance premiums) in each year, taking into account the amounts reduced due to excesses from previous years.

      For these purposes, for contributions and contributions to social security systems , the limit of article 52.1.b) of the Personal Income Tax Law operates by its increased total 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 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. , will be reduced, first of all, corporate contributions and contributions.

    Note: 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 Regulations 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 , regardless of the origin of the amounts contributed, without including the additional limit applicable to the premiums for group long-term care insurance paid by the company. 

    Note: the amounts corresponding to the excess contributions made and not reduced in the years 2018 to 2022 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 2023 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 2018 to 2022 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".