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What should the company take into consideration in relation to personal income tax?

Until June 30, we are in the campaign for the declaration of the Personal Income Tax for the year 2022 before the Tax agency so that all taxpayers declare the income they would have obtained this year. This tax, despite being a personal tax, has repercussions on the company itself, so we are going to analyze the most striking points.

We must emphasize that the Income Tax It taxes the economic influx that the taxpayer may have experienced in the tax period and, in addition, we must take into account the most characteristic elements of Personal Income Tax, so we can say that this tax:  

  1. It is a direct tax, since it taxes the direct manifestation of the taxpayer's economic capacity.
  2. It is a personal tax, since it is the individual or taxpayer himself who is the taxpayer of this tax.
  3. It is a subjective tax because the personal and family circumstances of the taxpayer are taken into account to modulate the tax burden.
  4. It is a general tax, both from the point of view of the income to be taxed and the people affected by it.
  5. It is a progressive tax, since the tax rate increases according to the increase in the taxpayer's income.

Once the basic aspects of this tax have been detailed, we can highlight those most characteristic elements that have a business impact:

Thus, first of all, we can highlight the work performance of the taxpayer himself where article 17.1 of the LIRPF establishes that "full income from work will be considered all compensation or profits, whatever their name or nature, monetary or in kind, that derive, directly or indirectly, from personal work or the employment or statutory relationship and do not have the character of income from economic activities […]».

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Work income and withholdings

We must keep in mind that work returns are subject to retention according to the corresponding percentage according to tables by the paying company and that will enter said amounts quarterly in form 111. These withholdings will be deducted from the taxpayer's net income tax quota.

Likewise, within the work performance, we consider it interesting to mention the travel allowances and allowances, where article 17.1, in section d, of the LIRPF establishes that income from work will be allowances and allowances for travel expenses, except for transportation and normal maintenance and stay in hospitality establishments with the limits established by regulation. establish.

We will find these limits in article 9 of the Personal Income Tax Regulations, which regulates those exemptions that would be outside the tax rate. However, the excess must be included as income from work and must be taxed in the tax itself.

Per diems and allowances

Thus, we can generally define the following diets and allowances:

  • Transportation expenses: if the employee uses public means of transportation, the amount exempt from tax will be the amount justified by an invoice or equivalent document; In any case other than this, the amount that will be excepted will be €0.19/km, adding justified toll charges and justified parking charges. Amounts that exceed this limit of €0.19/km. must be taxed.
  • Subsistence and subsistence expenses: allowances corresponding to normal subsistence and subsistence expenses in restaurants, hotels and other hospitality establishments are excepted, provided that the expenses occur in a municipality other than the usual place of work, or travel to another municipality does not exceed 9 months, that the day and place of the displacement is accredited, as well as the reason and that the amount does not exceed what is established in the mentioned article.

Within the performance of work, we must keep in mind the returns in kind that the worker can receive from the paying company. Article 42.1 of the LIRPF establishes that "the use, consumption or obtaining, for private purposes, of goods or services free of charge or for a price lower than the normal market price will be classified as such, (...) provided that they derive from a relationship labor or statutory. Therefore, we can classify as returns in kind the free use of housing, delivery of vehicles or computers, etc.).

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Finally, another element that we can take into account is the exemption provided for in article 7, section P, of the LIRPF, where an exemption is established for income from work for services performed abroad. This exemption declares "work income received for work actually performed abroad" exempt, with the condition that it meets the requirements established by regulation:

  • That the returns are about returns from work.
  • That there is a physical movement of the worker abroad to effectively carry out their work there.
  • That it is a non-resident company in Spain.
  • That in the territory where the work is carried out a tax of an identical or analogous nature to the Personal Income Tax applies. The requirement itself establishes that this fact will be taken as given if there is an agreement to avoid international double taxation that contains an information exchange clause.

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