Limit on maximum annual contributions to social security systems that may entitle the taxpayer to reduce the taxable income:
Maximum annual contributions (except for group dependency insurance)
As from January 1, 2022, the total maximum annual contributions made to the social welfare systems, including, if applicable, those that have been imputed by the promoters, which may entitle to reduce the general taxable income, may not exceed the following amounts:
General limit: €1,500 per year for total contributions and company contributions.
This general limit includes the employee’s contributions to both individual systems and to the employee welfare system, without the need in the latter case to be conditioned to the employer’s contributions.
Increase of the previous limit: 8,500 euros provided that this increase comes from employer contributions to employment systems or employee contributions to the same employment system for an amount equal to or less than such employer contributions.
For these purposes, the amounts contributed by the company that derive from a decision of the worker will be considered as contributions of the worker.
Therefore, this additional limit includes the worker’s contributions to his or her employment system, but conditioned to the making of employer contributions of at least the same amount and provided that the amounts contributed by the company do not derive from a decision of the worker (in which case they would be considered as contributions of the worker and could not be included in this increase, unless there were sufficient employer contributions that did not derive from a decision of the worker).
Therefore, the worker could contribute a maximum of 4,250 euros per year to be included in this limit (half of the increase in the limit) provided that the company makes employer contributions of another 4,250 euros. This would increase the maximum allowed limit to 8,500 euros.
Special rule for individual entrepreneurs:
For the purposes of calculating this limit, own contributions made by the individual employer to employment pension plans or mutual benefit plans of which he/she is also the promoter and, in addition, a participant or member, as well as those made to company pension plans of which he/she is also the policyholder and insured, will be considered as company contributions.
Maximum annual contribution for group dependency insurance:
In addition, an additional limit of 5,000 euros per year is established for the premiums paid by the company under group dependency insurance contracts taken out by the company to cover pension commitments and imputed to the employee, which is separate and independent from the aforementioned limits.
These limits will be applied individually to each participant integrated in the family unit.
Special rule for individual employers: For the purposes of calculating this limit, the contributions made by the individual employer to group dependency insurance policies of which he/she is both the policyholder and the insured will be considered as employer contributions.
Joint maximum limit of reduction: Art. 52.1 Personal Income Tax Law
The maximum joint tax reduction limit for contributions and contributions imputed by the promoter to the aforementioned social welfare systems, including, if applicable, the excesses pending reduction, from fiscal years 2017 to 2021, is constituted by the lesser of the following amounts:
(a) 30% of the sum of the net income from work and economic activities received individually in the fiscal year.
b) 1,500 euros per year. This limit is increased by 8,500 euros, provided that such increase comes from employer contributions or worker contributions to the same social welfare instrument for an amount equal to or less than the respective employer contribution, taking into consideration the amount of employer contributions, if any, made by several employers, to each of the social welfare systems on an individual basis.
For these purposes, the amounts contributed by the company deriving from a decision of the employee will be considered as contributions of the employee.
The own contributions that the individual employer makes to employment pension plans or mutual benefit plans, of which, in turn, he/she is the promoter and participant or member, as well as those made to company social welfare plans of which, in turn, he/she is the policyholder and insured, will be considered as company contributions, for the purpose of calculating this limit.
Therefore, in order for the contributions made by the individual entrepreneur to be considered as business contributions and be included in the computation of the limit of 8,500 euros, it will be necessary that the contributor be at the same time:
- In the case of contributions to a pension plan, promoter and participant.
- In the case of contributions to mutual benefit societies, promoter and member.
- In the case of corporate social welfare plans, the policyholder and the insured.
In addition, 5,000 euros per year for group dependency insurance premiums paid by the company.
The own contributions that the individual employer makes to group dependency insurance of which, in turn, he/she is the policyholder and insured, will be considered as company contributions, for the purpose of calculating this limit.
(Art. 51 a 52 y DA 16 LIRPF modificado por Ley 22/2021 de PGE con efectos desde 1 de enero 2022)