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V1606-21 27 May 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Temporary disability benefits and extraordinary COVID-19 aid are taxed as employment income

A self-employed individual inquired whether social security contributions paid by the mutual insurance company during a period of temporary disability affect their Personal Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that the benefit constitutes employment income and that the contributions paid by the mutual insurance company are part of said benefit, but are also a deductible expense.

The question raised

Impact on Personal Income Tax of the payment of self-employed contributions by the corresponding mutual insurance company during said situation of temporary disability.

The DGT's ruling

Social Security benefits for temporary disability are considered income from employment, including the amount of RETA contributions paid by the mutual insurance company. These contributions paid by the mutual insurance company constitute a deductible expense for determining the net income of the activity. Likewise, extraordinary benefits due to COVID-19 are classified as income from employment. The fact that there is no obligation to make contributions during the receipt of the extraordinary benefit has no impact on Personal Income Tax.

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