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V2697-20 2 September 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · convenio especial

Reimbursement of special agreement social security contributions is considered employment income and allows for a reduction in withholding tax

A pre-retired worker inquired whether the amount reimbursed by their company for social security contributions under a special agreement must be taxed and how it affects tax withholding. The Directorate General for Taxes (DGT) ruled that such reimbursement constitutes employment income, but it allows for a reduction in the base used to calculate withholding tax, provided the payments can be substantiated.

The question raised

Withholdings applicable to payments corresponding to the special agreement with the Social Security. Accreditation by the taxpayer of the amounts paid under the agreement with the Social Security.

The DGT's ruling

The amounts received as reimbursement of contributions under the special agreement constitute employment income. To determine the withholding base, the company must reduce the total amount of remuneration by the contributions paid by the employee, provided that the employee proves them by any means of evidence admitted in law. The withholding amount shall be the result of applying the corresponding rate to the amount of remuneration including said reimbursement after the reduction.

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