COVID 19 IMPLICATIONS ON 2020 PERSONAL INCOME TAX
There is no doubt that 2020 Personal Income Tax ( PIT) campaign, that will begin in April 2021, will be an unprecedented one, taking into consideration the numerous legal changes and the exceptional COVID 19 situation .
Thus, it is convenient to comment some implications that the current COVID 19 crisis and the fiscal measures associated to it during 2020, will provoke on the elaboration of 2020 PIT:
- Earnings received as a result of an ERTE.
It is commonly known that the negative impact of the pandemic, eased the access to ERTE, and many companies have used such possibility.
From the employee’s point, the perception of the referred benefits is not exempt from taxation on the PIT, and will be considered as a work earnings, having important consequences:
- a) Obligation to declare: the employee will have two payers, and consequently, if the Job Office ( SEPE) has paid more than Euros 1,500 to the individual, the limit to declare will decrease from Euros 22,000 to Euros 14,000 per year.
- b) It is highly likely that the declaration result will be to pay, since SEPE has been applying the minimum withholdings rates, in most of the cases.
A possible way to avoid this situation could be that the employee asks its company ( if already working ) or SEPE ( if still under unemployment) for an increase on the withholdings rate.
- Sick leaves.
Since the employee has two payers, we could be under the same scenario previously commented (ERTE) ; the limit to declare will be decreased, because after a certain period of time, regardless the sick leave is due to COVID or not, the company will stop paying the salaries, being the payer the Social Security.
- Maternity benefits.
Same as in previous tax years, mothers with children under 3 years old, with rights to apply the descendents allowance, could decrease their tax quotas in Euros 100 per month, only if they are working for a company or self-employed, and duly registered before the Social Security.
In accordance with Social Security legislation, in case the ERTE suspends their contracts,the employees will be unemployed to all effects.
Consequently, they will stop from being employees and therefore, they will not fulfill the requirements to perceive the maternity benefits. The only way of keeping the employee status is when the ERTE is partial.
The Tax Office criteria is that mothers in full time ERTE will not be entitled to receive maternity benefits until the ERTE ends, considering they will be unemployed during such time.
- Mortgage deferrals.
Those individuals to whom their banks granted deferrals on the payments of their mortgages due to COVID-19, will have a lower expense on their main residence investment.
This will provoke that tax payers who have been applying the deduction of main residence investment in the PIT, will have a lower base to apply it, and taking into consideration that this deduction has maximum limits, they could lose the right to apply the deduction on those amounts in subsequent periods.
- Non-Monetary earnings: use of company´s car.
The alarm status and the mobility restrictions, will not affect the consideration of the use of a company car as a non-monetary contribution. The Tax Office understands that such consideration only depends on the mere availability of the vehicle, and not on the actual use of it.
- FreeLancer benefits (“prestación por cese de actividad”)
Freelancers that have been perceiving these benefits ( “Prestación por cese de actividad”) will need to treat them on their PIT as if they were salaries ( work earnings).
There are other implications as a result of the pandemic, hence we are at your disposal for any clarification of doubt you may have.