If the taxpayer is required to pay an additional amount in the following tax year, this additional payment must be treated as a higher deductible expense for Social Security contributions in that year. Conversely, if the taxpayer is due a refund, it will be treated as a lower deductible expense for Social Security contributions paid in the following tax year. If the refund amount exceeds the total Social Security contributions paid, the excess must be recognized as higher income in that tax year.
As you may already know, since January 1, 2023, all self-employed workers included in this special scheme will contribute based on the annual income obtained in the development of their economic, business or professional activities, having to choose the corresponding monthly contribution base according to their forecast of net annual income, within the general table set in the respective General State Budget Law and limited by a minimum contribution base in each of its sections and by a maximum base in each section for each year, although with the possibility, when they foresee that their income will be less than the minimum interprofessional wage on an annual basis, of choosing a contribution base within a reduced table.
The chosen bases will be provisional, until they are regularized according to the annual income obtained and communicated by the Tax Administration from the following year onwards for each self-employed worker.
Based on the above, the amounts calculated in the previous year will be considered legally due amounts, although provisional, which is why it will not be appropriate to submit a rectification of self-assessment or a supplementary declaration with respect to the declaration made in that year.
Expenses of the business owner in the Personal Income Tax (IRPF): Social Security or contributions to alternative mutual insurance schemes of the business owner
These expenses include the contributions of the business owner to the Special Regime for Self-Employed Workers (RETA).
If, as a result of the regularization of the RETA contributions carried out in the following year, based on the actual income obtained, there is an additional amount to be paid or refunded as RETA contributions, this amount will have the following tax treatment in the IRPF:
- If an additional amount is due from the taxpayer in the following year, this additional payment must be treated as a higher deductible expense for Social Security contributions in that following year.
- If, on the other hand, there is an amount to be refunded to the taxpayer, it will be treated as a lower deductible expense for contributions paid to Social Security in that following year, and if the amount exceeds that of the contributions paid to Social Security, the excess must be reflected as a higher income in that year.
MULTIPLE ACTIVITIES. Deductibility of the tax liability in the case of a taxpayer who receives income from employment (for example, as a company director) and income from an economic activity
When self-employed workers simultaneously carry out two or more activities that give rise to inclusion in this special regime, their registration in it will be unique, and they must declare all their activities in the registration application or, if the multiple activity occurs after it, through the corresponding data variation.
With this configuration of the contributions to the Special Social Security Scheme for Self-Employed Workers (RETA) - which establishes the obligation to declare multiple activities in this scheme - to determine the impact of the expense corresponding to these contributions on the taxpayer's Personal Income Tax (IRPF), it must be taken into account that these contributions correspond to registration in this scheme while carrying out more than one activity, so their deductibility in the IRPF can be carried out by the taxpayer either in the determination of the net income from work (for their remuneration as administrator of the company) or in the determination of the net income from the economic activity, since in each of these cases they have an obligation to contribute to the RETA, which allows the taxpayer to decide where to incorporate that single contribution.
- Attention. If you carry out your economic activity under the simplified direct estimation method, it will generally be more advantageous to deduct expenses from your employment income. Thus, given that in your 2023 income tax return you will be entitled to a 7% reduction—instead of the usual 5%—of your net business income (up to a maximum of €2,000) for expenses that are difficult to justify, this income will be higher, and therefore the reduction will also be greater.
Covid-19: the exemption from the obligation to contribute in favor of self-employed workers who have received the extraordinary benefit for cessation of activity provided for in section two of article 26 of Royal Decree-Law 11/2022, of June 25, referred to in article 97 of Royal Decree-Law 20/2022, of December 27, on measures in response to the economic and social consequences of the War in Ukraine and support for the reconstruction of the island of La Palma and other situations of vulnerability determines its lack of impact on Personal Income Tax, as it does not correspond to any of the cases of obtaining income established in article 6 of the Personal Income Tax Law, therefore not having the nature of gross income nor correspondingly that of a deductible expense for the determination of income.
You can contact this professional office for any questions or clarifications you may have.
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A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
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