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Practical manual for Income Tax 2024. Part 1

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 Sixteenth Additional Provision of the LawPIT

  • Maximum annual contributions (except for collective dependency insurance)

    As of January 1, 2023, the set of maximum annual contributions made in the year to the social security systems, including, where applicable, those that have been imputed by the promoters, which may give the right to reduce the general tax base 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 contributions from workers to both individual systems and employment-based social security systems, without the need in the latter case to be conditional on the making of employer contributions. 

    • Increase from previous limit:

      It is necessary to distinguish:

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

        The employee's contributions must be equal to or less than the amounts resulting from the following table depending on the total income received by the employee from the employer making the contributions and the annual amount of the employer's contribution:

        8,500 euros provided that this increase comes from employer contributions to employment systems or from employee contributions to the same employment system for an amount equal to or less than such employer contributions.

        Gross earnings of the worker (*) Annual amount of the business contribution (**) Maximum contribution of the worker (***)
        Gross income from work equal to or less than 60,000 euros Equal to 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.
        Gross income from work exceeding 60,000 euros Any amount The result of multiplying the business contribution by 1.

        Notes to table :

        (*) The total gross income received by the worker should not be considered, but rather the gross income that comes from each employer who makes the contribution . Therefore, the multiplier must be determined by considering the income from the various employers individually. 

        (**) Contributions to different social security systems by the same employer : The amount of employer contributions made by each employer to each of the social security systems individually must be taken into account, without adding up the employer contributions for these purposes.

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

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

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

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

      2. Increase for contributions from self-employed workers: 4,250 euros

        Note: the increase in this reduction limit, of 4,250 euros, provided for in article 52.1.b) 2 of the Law of the PIT It cannot be multiplied by making contributions to various instruments mentioned in said provision, and detailed below.

        It must be one of the following contributions:

        • Contributions to the sector 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 freelancers who join said plans by reason of their activity.

          These are employment pension plans promoted by companies included in sector-specific collective agreements that implement pension commitments for their employees, with special attention to promoting their implementation in small and medium-sized companies.

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

          These are pension plans for self-employed workers or freelancers, promoted by associations, federations, confederations or unions of associations of self-employed workers or freelancers, by unions, by professional associations or by social welfare mutual funds, in which the participants are exclusively self-employed workers or freelancers. The prior condition of being a member will not be required for the participant who wishes to join a plan promoted by an association of self-employed workers or freelancers.

        • Personal contributions made by the individual entrepreneur or professional to employment pension plans of which he/she is the promoter and, in addition, a participant.

        • Personal contributions made by the individual entrepreneur or professional to Social Security Mutual Societies of which he/she is a member.

        • Personal contributions made by the individual entrepreneur or professional to company social security plans or collective dependency insurance of which he or she is the policyholder and insured.

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

  • Maximum annual contribution for collective dependency insurance

    In addition, for the premiums paid by the company under collective dependency insurance contracts contracted by it to cover pension commitments and imputed to the worker, an additional limit is established, independent of the previous ones, of 5,000 euros per year.

    These limits will be applied individually to each participant in the family unit.

    Exceptionally, the sponsoring company may make contributions to an occupational pension plan of which it is the promoter when necessary to guarantee the current benefits or the rights of the participants in plans that include defined benefit schemes for retirement and the existence of a deficit in the pension plan has been revealed through actuarial reviews.

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

    Therefore, in the case of an individual or self-employed entrepreneur, as he does not have the status of worker, insured and beneficiary at the same time, the independent limit of 5,000 euros for premiums to collective dependency insurance in article 52.1 of the Law of the PIT.

B. Joint maximum limit for reduction in the tax base

Regulations: Art. 52.1 Law PIT

  1. In general

    The maximum joint tax reduction limit to be applied to the taxable base for contributions and contributions attributed by the promoter to the social security systems, including, where applicable, the excesses pending reduction, from the years 2019 to 2023, is constituted by the lowest of the following amounts:

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

      The concept of net work income that must be taken into account to apply the aforementioned limit is the one defined in article 19 of the Law of PIT, that is, the result of reducing the gross income (including the reduction by applying the reduction in article 18) by the amount of deductible expenses.

      As regards the net income from economic activities, it is the amount determined prior to the application of the reductions provided for in article 32 of the Law on PIT. For these purposes, the net income from economic activities attributed by entities under an income attribution regime will be included in the aforementioned sum, provided that the participating taxpayer or member of said entities actually 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 employer contributions, or from employee contributions to the same social security instrument for an amount equal to or less than the amounts resulting from the following table, based on the total income received by the employee from the employer making the contributions and the annual amount of the employer contribution:

      Gross earnings of the worker  Annual amount of the business contribution Maximum contribution of the worker
      Gross income from work equal to or less than 60,000 euros Equal to 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.
      Gross income from work exceeding 60,000 euros Any amount The result of multiplying the business contribution by 1.

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

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

      Note: the increase in this reduction limit, of 4,250 euros, provided for in article 52.1.b) 2 of the Law of the PIT It cannot be multiplied by making contributions to various instruments mentioned in said provision, and detailed below.

      • Contributions to sector-specific occupational 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 freelancers who join said plans by reason of their activity.

      • Contributions to simplified occupational pension plans of self-employed workers or freelancers 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.

      • contributions made by the individual entrepreneur or professional to Social Security Mutual Societies of which he/she is a member.

      • Personal contributions made by the individual entrepreneur or professional to company social security plans .

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

      3. In addition, 5,000 euros per year for the premiums for collective dependency insurance paid by the company.

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

      Note: Please note that the tax base cannot be negative as a result of the reductions, so the amount of the reduction must also be taken into account as a limit for the reduction.

    Note: Pan-European personal pension products

    To the pan-European individual pension products regulated in Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-European personal pension product shall apply to them in the PIT the treatment appropriate to pension plans.

    In particular, theThe contributions of savers to pan-European individual pension products may reduce the general tax base under the same terms as those made to pension plans and will be included in the maximum joint limit provided for in Article 52 of the Law on PIT for social security systems.

  2. Particularities relating to severe or highly dependent care insurance

    A distinction must be made between private insurance and collective insurance.

    • Private insurance: without prejudice to the fact that they are subject to the above maximum reduction limits, in the case of premiums paid to private insurance covering the risk of severe or great dependency, it must also be taken into account that the total reductions made by all persons who pay premiums in favour 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.

    • Collective insurance: Pension commitments assumed by companies, including accrued benefits, may be implemented through collective dependency insurance contracts made in accordance with the provisions of the First Additional Provision of the consolidated text of the Law on Regulation of Pension Plans and Funds, approved by Royal Legislative Decree 1/2002, of November 29, in which the company will appear exclusively as the policyholder 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 charged to the employee will have an 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 amended, with effect from September 4, 2018, by the first article of Royal Decree-Law 11/2018, of August 31, on the transposition of directives regarding the protection of pension commitments with workers, the prevention of money laundering and entry and residence requirements for nationals of third countries and which modifies Law 39/2015, of October 1, on the Common Administrative Procedure of Public Administrations ( BOE of September 4).

    Income Tax Return 2024 : in the section "Reductions for contributions to social security systems" of the declaration of PIT a distinction is made between:

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

    • Contributions made by the company that arise from a decision made by the employee. Box [ 0438]

    • Contributions by the employee to the employment pension plan, social welfare mutual fund or company social welfare plan, provided that company contributions have been made. Box [ 0426]

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

    • Contributions from 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 PIT; art. 51 and nineteenth transitional provision of the RegulationPIT

    The amounts contributed by participants, mutual fund members or insured persons to social security systems, including those made by the promoter or by the company that have been imputed to them and that could not have been subject to reduction in the financial years 2019 to 2023 due to insufficient tax base or by application of the percentage limit of 30% of the sum of net income from work and economic activities, will be imputed to the current financial year, provided that the ability to reduce the excess in the following five financial years has been requested in the respective declarations .

    The reduction of excess amounts for the years 2019 to 2023 will be prioritized for contributions made and contributions allocated during the year and will be carried out subject to the maximum reduction limits indicated above.

    As for the way to apply excesses The Personal Income Tax Regulation allows 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 were paid they respected the maximum annual contributions (article 51.6 and Sixteenth Additional Provision of the Personal Income Tax Law). PIT) .

    On the other hand, excess amounts corresponding to premiums for collective dependency insurance will be charged within their own limit.

    In the event that the limit of 30% of 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 premiums to collective dependency insurance, the following procedure will be followed:

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

      For these purposes, for contributions to social security systems, the limit of article 52.1.b) of the Law of the PIT It operates for its total increased 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 net income from work and economic activities, or, ultimately, the amount of the general tax base, will operate as a global limit.

    2. The amounts that can be reduced in each year will be applied in order of seniority and in the event that, for the same year, the total amounts cannot be reduced and contributions and employer contributions and premiums for collective dependency insurance concur in the same year, will be reduced, first, the employer contributions and contributions.

    Note: Article 1 of Royal Decree 1039/2022, of December 27 (BOE of December 29) modified article 51 and the nineteenth transitional provision of the Regulations of the PIT to facilitate the application of pending reduction excesses and mitigate their complexity. To this end, the proportional application of excess amounts between contributions is eliminated, and the application of the increased maximum limit (1,500 + 8,500 euros) is permitted regardless of the origin of the amounts contributed, on the understanding that in the year in which they were paid, the maximum annual contributions were respected. 

    D. Excess contributions and contributions corresponding to the fiscal year

    Regulations: Arts. 52.2 LawPIT and 51 RegulationPIT

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

    Such excess It can be applied in the following five years respecting the increased total limit referred to in 52.1 of the Law of PIT, regardless of the origin of the amounts contributed, not including the additional limit applicable to the premiums for group dependency insurance paid by the company. 

    Note: the amounts corresponding to the excess contributions made and not reduced in the years 2019 to 2023 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 as the unapplied contributions of 2024 whose amount is requested to be reduced in the following 5 years, must be recorded in Annex C.3 of the declaration, in one of the following sections, as appropriate: "Unreduced excess of employer contributions to social security systems corresponding to the years 2019 to 2023 pending reduction, except for employer contributions to collective dependency insurance", or in the section relating to "Unreduced excess derived from employer contributions to collective dependency insurance pending reduction in subsequent years".