Workers may deduct special agreement contributions from Personal Income Tax

The tax treatment of reimbursements made by companies to cover the cost of the special agreement with Social Security has been defined following a recent resolution by the Directorate General of Taxes (DGT). This issue directly affects the taxable base of employment income for employees in this situation.

What the DGT has ruled

The query focused on whether the amount paid for the cost of the special agreement should be included in the Personal Income Tax (IRPF) return as a deductible expense. The Administration's criteria establish that the amount the company reimburses to the worker for said cost constitutes, in principle, employment income.

However, the DGT clarifies that contributions to the special agreement maintain their nature as a deductible expense in accordance with the provisions of Article 19.2 a) of the Law on Personal Income Tax (LIRPF). Consequently, these amounts are treated as tax-deductible expenses from employment income.

What this means for you

If you are a worker receiving a reimbursement from your company to cover contributions to the special agreement with Social Security, you should keep the following in mind:

• The amount received from the company is integrated into your employment income.
• That same amount can be subtracted from your income as a deductible expense.
• The applicable regulations for this treatment are Law 35/2006 (LIRPF) and Order TAS/2865/2003.

For the company, this scenario implies that the payment made to finance the agreement generates employment income for the employee, which requires correct management of withholdings and information in the withholding certificates.

What you should do

It is necessary to verify that the inclusion of these amounts in the tax return is carried out following the DGT's criteria, ensuring that the income received is offset by the corresponding deduction as an expense. Since each contractual situation may vary, it is recommended to assess the application of this criterion in each particular case to ensure compliance with current regulations.