As we all know, the Government has been approving various measures in order to curb the health and economic crisis caused by the outbreak of the coronavirus.
Measures such as temporary layoffs (ERTEs), the benefit for cessation of activity for self-employed workers, the possibility of requesting moratoria or reductions in rents cause alterations in our income and therefore will have an impact on the 2020 income tax return that we must declare.
The impact on our tax return will largely depend on the duration of these measures: how long we remain on furlough, how many months of moratorium we have, or what discount we grant to our tenants….
Below, we detail some of the repercussions that these measures will have on the next tax return:
- Benefits received as a result of a temporary layoff (ERTE).
Workers affected by a temporary layoff (ERTE) who have received contributory unemployment benefits should be aware that this benefit is not exempt from taxation and must be included in the tax return as employment income.
But be aware that even if the total income received is the same as, or even less than, what was previously received, the thresholds that determine whether or not you are required to file a tax return vary depending on whether the income comes from one or multiple employers. The €22,000 threshold for the obligation to file a return drops to €14,000 when there is more than one employer and the payment from the second employer exceeds €1,500.
We must be cautious to avoid surprises because the SEPE (Spanish Public Employment Service) barely withholds any taxes on benefits, and the tax return we submit next year regarding 2020 income may result in a lower refund than usual, or even, depending on the duration and level of furlough benefits, result in an amount payable.
If you have experienced any issues receiving your benefits, whether due to delayed payments (you only receive them in 2021), legal claims, overpayments, or even if your temporary layoff (ERTE) has been declared invalid and you are now being asked to repay it, you should be aware of the specific circumstances and applicable regulations. In this case, we advise you to seek advice from our experts.
- Deduction for maternity or paternity leave in the case of temporary layoff (ERTE)
Let us remember that the requirements for applying the working mother deduction in the Personal Income Tax (IRPF) are generally as follows:
- Having children under three years of age entitled to the application of the minimum allowance for dependents.
- To carry out an activity on one's own account or for others for which one is registered in the corresponding Social Security or Mutual Insurance scheme
According to Article 262.2 of the consolidated text of the General Social Security Law, in the case of temporary employment regulation files in which the employment contract is suspended, the taxpayer is in a situation of total unemployment.
Therefore, in cases of suspension of the employment contract as a result of the approval of a temporary employment regulation file, the activity on behalf of others ceases and the requirements to enjoy the maternity deduction and the corresponding advance payment are no longer met.
- Leasing of real estate
Landlords who have rented properties may have agreed with their tenants:
- Reduction for a few months: the landlord will reflect as full income for the months affected by the rent reduction the new amounts agreed upon by the parties, whatever their amount, and expenses necessary for the rental incurred during the period affected by the modification will continue to be deductible. The 60% reduction will continue to apply when dealing with leases of real estate intended for housing.
- Rent payment moratorium: the landlord should not report any income for the months in which the payment has been deferred. As in the previous case, necessary rental expenses incurred during the period affected by the modification will still be deductible. It is important to note that imputed rental income will not apply since the property remains rented. Furthermore, the 60% reduction will apply to rentals of residential properties.
- Debt forgiveness: the landlord has to impute real estate income because the forgiveness presupposes the existence of the income even though its non-payment is accepted
We see that the impact on income tax is significant depending on the specific circumstances. It is important to have documentary evidence of the specific agreement reached in order to demonstrate whether or not the income declaration is required.
You can contact this professional office for any questions or clarifications you may have.
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A graduate in Business Administration from the University of Barcelona, she has furthered her training in tax and accounting by attending courses and seminars offered by the EAE Business School, the College of Economists, the Bar Association, and the Terrassa Chamber of Commerce.
She combined her studies with work in the family business and as a substitute in the production audit department of Bimbo SA.
She has spent her professional career at Àmbit Assessor, where she joined in 1991 to support the accounting and tax department, becoming a consultant a few years later.
Since 2000, she has been the managing partner of the company.
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