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Practical Income Manual 2023.

Case a) Registration in Social Security after birth and 30 days of contributions in the month of May

Mrs. MDO was not registered with Social Security or any mutual insurance company at the time of the birth of her twins, but in April she was hired by the company TT and registered with Social Security, complying with the requirement of having a period minimum of 30 days of contributions until May 20, 2023 and the total amount of annual contributions amounts to 475 euros. 

The taxpayer had not worked prior to this date.

Solution:

1. Maternity deduction amount

Deduction corresponding to each of the twins:

  • Number of months of compliance with the requirements: 8 months

  • Deduction amount: [(8 months x 100 euros) + (1 month x 150)] = 950

  • Deduction limit per child (1,350 euros).

  • Total amount of the deduction corresponding to the twins = 950 x 2 = 1,900

Note: In this case, the taxpayer, after the birth of the twins, has become registered with Social Security after the birth, reaching the 30 days of contributions required by article 81 of the Personal Income Tax Law in May, so 100 euros correspond to you for each month from that moment on (including May) plus the increase of 150 euros corresponding to the month in which you reach said minimum period.

Therefore, Ms. MDO will be entitled to the deduction for a total amount of 1,900 euros (950 euros for each twin, taking into account 8 months - from May to December - plus the increase of 150 euros corresponding to the month of May, in which reaches the minimum contribution period).

Contributions have not been taken into account to determine the deductible amount because as of January 1, 2023, this limitation on the amount of the deduction to contributions accrued in the tax period disappears.

Deduction corresponding to the oldest child:

  • Number of months of compliance with the requirements: 4 months

  • Deduction amount [(4 months x 100 euros) + (1 month x 150)] = 550

  • Deduction limit per child (1,350 euros)

Note: Since Ms. MDO did not work before May 2023, she was never entitled to the maternity deduction for the eldest child. However, as from January 1, 2023, the assumptions that give rise to this right have been expanded, as in the case of twins, Ms. MDO also generates the right to the maternity deduction for the eldest child as of January 1, 2023. month of May included, month in which the requirement of reaching 30 days of contributions is met and maintains it until the month before the child reaches the age of 3, that is, from May to August both included, since the 2nd September 2023 the child turns 3 years old.

When the limit on contributions accrued in the tax period disappears, the amount corresponding to the maternity deduction for this child amounts to 550 euros (100 euros for each month starting in May, plus the increase of 150 euros corresponding to the month of May in that reaches said minimum period of 30 days of contributions).

Total amount of maternity deduction 2023: (1,900 + 550) = 2,450

2. Additional increase for custody expenses

Additional increase corresponding to the eldest child:

  • Number of months of compliance with the requirements: 2 months

  • Amount of the increase (1,000 euros ÷ 12 months x 2 months) = 166.67

Note: In the present case, the additional increase for custody costs for a child under three years of age in authorized daycare centers or early childhood education centers can reach up to 1,000 euros per year and will be calculated proportionally to the number of months in which the required requirements are simultaneously met. in article 81.1 and 2 of the Personal Income Tax Law. The months to be taken into consideration are exclusively those in which the expenses paid are made for a full month. Therefore, to the extent that you are only entitled to the maternity deduction from the month of May, included, and the increase for daycare expenses can only be extended until the month prior to the start of the second cycle of early childhood education (September ) computing complete months, only 2 complete months are taken into account (May and June), so the calculation will be 1000 euros ÷ 12 months x 2 months) = 166.67 euros.

  • Increase limit: 166.67 euros.

  • The increase of 166.67 euros does not exceed the limit of the total amount of the non-subsidized effective expenditure of custody expenses: 2,290 euros.

Note: in accordance with article 81 of the Personal Income Tax Law and article 60 of the Personal Income Tax Regulations, the total non-subsidized expense corresponding to the total annual amounts (for complete or incomplete months) paid to daycare centers or early childhood education centers authorized by pre-registration and enrollment of said minors, attendance, in general and extended hours, and food, will be reduced by the amounts of said expenses that have been met by the employing companies of the beneficiaries that were considered income from work in kind exempt by application of the provisions of letters b) or d) of section 3 of article 42 of the Personal Income Tax Law.

Therefore, in this case the custody expenses will be: 300 (tuition) + 3,000 (6 full months) + 250 (incomplete month of July) – 700 (subsidized amount) – 560 (80 x 7 months, corresponding to exempt remuneration in kind) = 2,290 euros.

Note: Even if it has been paid by both parents at 50%, both the amount paid by the mother or the taxpayer entitled to the aforementioned increase and the amount paid by the other parent will be considered.

3. Tax return result

Differential fee: 1,500.00

Deduction for maternity

  • Deduction amount (1,900 + 550) = 2,450

  • Increase for daycare expenses (166.67) = 166.67

Statement result (1,500 − 2,450 − 166.67): −1,116.67