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Practical manual for Income Tax 2023.

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

At the time of the birth of her twins, Ms. MDO was not registered with Social Security or any mutual insurance company, but in April she was hired by the company TT and registered with Social Security, meeting the requirement of having a minimum period 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 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 for 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 she is entitled to 100 euros for each month from that moment on (including May) plus the increase of 150 euros corresponding to the month in which she reaches said minimum period.

Therefore, Ms. MDO will be entitled to a 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, when the minimum contribution period is reached).

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 for contributions accrued in the tax period disappears.

Deduction for the eldest son:

  • Number of months of compliance with requirements: 4 months

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

  • Limit on deduction per child (1,350 euros)

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

With the removal of the limit on contributions accrued in the tax period, the amount corresponding to the maternity deduction for this child rises to 550 euros (100 euros for each month from May, plus the increase of 150 euros corresponding to the month of May in which the minimum period of 30 days of contributions is reached).

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

2. Additional increase for custody expenses

Additional increase for the eldest child:

  • Number of months of compliance with requirements: 2 months

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

Note: In this case, the additional increase for child care expenses for a child under three years of age in authorised nurseries or early childhood education centres may reach up to 1,000 euros per year and will be calculated proportionally to the number of months in which the requirements set out in article 81.1 and 2 of the Personal Income Tax Law are met simultaneously. The months to be taken into consideration are exclusively those in which the expenses paid are made for a full month. Therefore, since you are only entitled to the maternity deduction from the month of May, inclusive, and the increase for nursery expenses can only be extended until the month prior to the start of the second cycle of early childhood education (September), taking into account full months, only 2 full 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 actual non-subsidized expenditure of custody costs: 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-subsidised expenditure corresponding to the total annual amounts (for full or incomplete months) paid to authorised nurseries or early childhood education centres for the pre-registration and enrolment of said minors, attendance, during general and extended hours, and food, will be reduced by the amounts of said expenses that have been paid by the companies employing the beneficiaries that are considered exempt income in kind by application of the provisions of letters b) or d) of section 3 of article 42 of the Personal Income Tax Law.

Therefore, in the present case the custody costs will be: 300 (registration) + 3,000 (6 full months) + 250 (part 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

Result of the declaration (1,500 − 2,450 − 166.67): −1,116.67