Refund of contributions due to multi-activity is taxed as business income

The Directorate General of Taxes (DGT) has issued a relevant ruling regarding the tax nature of Social Security contribution refunds received by workers with multi-activity. This pronouncement defines how these amounts must be integrated into the income tax return.

What the DGT has ruled

The inquiry addresses the taxation in Personal Income Tax (IRPF) of the refund of contributions to the Special Regime for Self-Employed Workers (RETA) motivated by the existence of multi-activity. The binding body has established that said refund must be classified as income from the economic activity itself.

The basis for this decision lies in the fact that the contributions originally paid constituted a deductible expense for the taxpayer. Therefore, when the reimbursement occurs, it must be treated as income. Regarding the timing of recognition, the income shall be recognized in the tax period in which it accrues, in accordance with Corporate Tax regulations, or under the cash basis if the taxpayer has opted for that method.

What it means for you

If you are a worker with multi-activity and receive a refund of Social Security contributions, this amount should not be considered exempt income or a mere recovery of capital, but rather income derived from your economic activity. This implies that the amount will be subject to the corresponding taxation in your IRPF return within the returns from economic activities.

What you should do

It is necessary to verify how these reimbursements are being integrated into your accounting and your income tax return. Since the nature of the income directly affects the calculation of the taxable base of the activity, it is recommended to assess each particular situation to ensure that the timing of recognition and the classification of the income comply with current regulations and the DGT's ruling.