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Practical manual for Income Tax 2023.

Reductions for compensatory pensions and annuities for food

Regulations: Art. 55 Law Income Tax

1. Compensatory pensions in favor of the spouse

According to civil legislation (article 97 of the Civil Code), the spouse whose separation or divorce causes an economic imbalance in relation to the position of the other, which implies a worsening of his or her previous situation in the marriage, has the right to a pension that will be set in the judicial resolution of separation or divorce or in the regulatory agreement formalized before the judicial secretary or the Notary. 

For payer , the compensatory pension paid, provided that it has been set in the court ruling, or has been agreed by the spouses in the separation or divorce settlement agreement, reduces their general tax base without being able to result in a negative result as a result of this reduction. The remainder, if any, will reduce the taxable savings base, without the latter being able to become negative as a result of said reduction.

Clarifications:

According to the provisions of article 89 of the Civil Code, “The effects of the dissolution of marriage by divorce will occur from the finality of the sentence or decree that so declares or from the manifestation of the consent of both spouses granted in a public deed in accordance with the provisions of article 87.”

Therefore, the reduction in the concept of compensatory pension in favor of the spouse will only apply with respect to the amounts paid since the finality of said sentence or decree, or since the granting of a public deed that so declares.  

For recipient , the compensatory pension received from the spouse constitutes, in any case, work income not subject to withholding because the spouse paying the pension is not obliged to withhold.

2. Annuities for food in favor of people other than children

In accordance with the provisions of Article 143 of the Civil Code, spouses, ascendants and descendants, as well as siblings are mutually obliged to provide support in the cases and terms indicated in the aforementioned article.

However, when the taxpayer is required to provide support, it is necessary, for the purposes of its treatment in the IRPF , to distinguish between two situations:

  1. Annuities for foodstuffs in favour of children

    For payer , the amounts paid in child support do not reduce the general tax base, but are subject to special treatment consisting in that, when the amount of said annuities is less than the general taxable base and there is no right to apply the minimum for descendants, they are subject to taxation separately in order to limit the progressivity of the tax scales. 

    The liquidation treatment of the annual alimony payments in favor of the children, the amount of which is less than the general taxable base subject to tax, is discussed in Chapter 15.

    For children receiving of said annuities, they constitute exempt income, provided that they are received by judicial decision or by virtue of the regulatory agreement decreed judicially or formalized before the judicial secretary or in a public deed before a Notary referred to in article 90 of the Civil Code, or the equivalent agreement provided for in the regulations of the Autonomous Communities.

  2. Annuities for food in favor of other people

    For payer , amounts paid in alimony to persons other than the children, provided that they are set by court decision, reduce the payer's general tax base without being able to result in a negative result as a result of this reduction. The remainder, if any, will reduce the taxable savings base, without the latter being able to become negative as a result of said reduction.

    For the recipient of the same, these annuities constitute employment income not subject to withholding.

3. Special case: compensatory pension and annuities for food without distinction

In cases of legal separation or divorce, a compensatory pension will normally be established in favor of one of the spouses, and, on the other, the obligation to pay an amount in the form of child support for the parent who does not have them in his or her care.

In the special case where the obligation of a single payment is established, without specifying in the judicial resolution or in the regulatory agreement which part corresponds to compensatory pension and which part to annual maintenance payments, the impossibility of determining the amount corresponding to the compensatory pension prevents applying the reduction of the base for this concept. All of this without prejudice to the fact that at a later time the amounts corresponding to each concept may be judicially specified.

Summary table of the tax treatment of compensatory pensions and alimony annuities

Compensatory pension and alimony annuities  Payer Percipient
Spousal pension Reduce the Tax Base Work performance
Child support annuities Special rule for determining the full state and regional quota (*) Exempt income
Alimony for a person other than children Reduce the Tax Base Work performance

Note to table : They receive the same treatment in cases where they are adopted by an equivalent agreement provided for in the regulations of the Autonomous Communities, approved by the judicial authority or formalized before the Clerk of the Court of Justice or in a public deed before a Notary.

(*) See, within Chapter 15, the specialties for the payer of these child support annuities and an example in which the liquidation operations in these cases are detailed.