Professionals in alternative mutual funds may deduct their contributions for Personal Income Tax (IRPF)

Professionals who carry out their activity as self-employed and are not integrated into the Special Regime for Self-Employed Workers (RETA), but instead use alternative mutual funds, have a way to deduct their contributions for Personal Income Tax (IRPF).

What the DGT has resolved

The Directorate General of Taxes (DGT) has determined that the amounts paid to these mutual funds are considered deductible expenses for economic activity, provided they meet two fundamental requirements:

• Coverage of contingencies: Deductibility is limited to the portion of the contributions that covers contingencies handled by the Social Security.
• Quantitative limit: The deductible amount may not exceed the maximum contribution for common contingencies established for the special regime for self-employed workers in each fiscal year.

For this expense to be admitted, the regulations require it to be duly justified by an invoice or substitute document and to be recorded in the mandatory accounting books of the activity.

What it means for you

If you are a professional using an alternative mutual fund, your contributions are not a completely free expense, but are subject to a maximum ceiling. This ceiling is dynamic, as it depends on the maximum contribution for common contingencies that the Social Security sets for self-employed workers each year. Therefore, the tax benefit is directly linked to the parameters of the RETA, even if you do not belong to it.

What you should do

It is necessary to verify that the mutual fund you belong to covers the contingencies that the Social Security usually assumes. Likewise, you must ensure that the documentation received complies with the documentary support requirements to prevent the Administration from rejecting the expense due to lack of justification. It is recommended to assess the particular situation of your contributions against the established annual limits to ensure that deductibility is applied correctly in your tax return.