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Practical manual for Income Tax 2024. Part 1

Article 38 ter LIS "Deduction for business contributions to corporate social security systems"

Note: Article 38 ter of the LIS was added by the Fifth Final Provision of Law 12/2022, of June 30, regulating the promotion of occupational pension plans, which modifies the consolidated text of the Law on the Regulation of Pension Plans and Funds, approved by Royal Legislative Decree 1/2002, of November 29 ( BOE of July 1).

For taxpayers of Personal Income Tax , the Third Additional Provision of Royal Decree-Law 13/2022, of July 26, which establishes a new contribution system for self-employed workers or freelancers and improves protection for cessation of activity ( BOE of July 27), specified that, with effect from January 1, 2023, self-employed workers with employees under their charge may practice this deduction under the terms and conditions provided for in article 68.2 of the Personal Income Tax Law .

Requirements for applying the deduction

Taxpayers may apply this deduction when the following requirements are met:

  • Having made business contributions to social security systems imputed in favor of their employees.

  • Such business contributions in favour of these workers must be made specifically to one of the following social security systems:

    • Employment pension plans

    • Corporate social security plans

    • Pension plans regulated by Directive ( EU ) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of pension funds employment

    • Mutual benefit societies that act as a social benefit instrument of which the taxpayer is the promoter ##

See Chapter 13 for the section on “ Reductions for contributions and contributions to social security systems ”.

Amount of deduction

To determine the total deductible amount, a distinction must be made between:

  • Business contributions imputed in favour of workers with gross annual salaries of less than 27,000 euros: In this case, a deduction of 10% of such contributions may be made.

  • Business contributions imputed in favour of workers with gross annual salaries equal to or greater than 27,000 euros: In this case, the deduction to be applied will be the result of applying the percentage of 10% on the proportional part of the imputed business contributions that correspond to the amount of the gross annual remuneration mentioned in the previous point.

Example

Mr. JMAZ  develops an economic activity whose net income is determined by the direct estimation method.

It has a staff of 4 employees. One of them receives a gross annual salary of 41,800 euros and the other three receive gross annual salaries of less than 27,000 euros.

During 2024, the company contributed the following amounts to an employment pension plan for its employees (which were allocated to them as income from work in kind):

  • The worker with a gross annual salary of 41,800 euros: 2,500 euros

  • Workers with gross annual salaries of less than 27,000 euros: 2,000 euros (each)

Determine the amount of the deduction for business contributions to corporate social security systems that would apply in fiscal year 2024.

Solution :

  1.  For workers with gross annual wages of less than 27,000 euros

    10% on (2,000 € annual contribution x 3 workers) = 600 euros

  2. For the worker with a gross annual salary of 41,800 euros

    10% s/ [(27,000 ÷ 41,800) x 2,500 annual contribution] = 161.48 euros

Total to deduct (600 + 161.48) = 761.48