The Directorate General of Taxes (DGT) in a consultation of 7 December 2022 has ruled on the treatment that the regularization of RETA contributions paid in the previous year should have in Personal Income Tax.
The computable income from each of the activities carried out by “the self-employed” will be calculated in accordance with the Personal Income Tax regulations for calculating the net income.
The Directorate General of Taxes (DGT) in a recent consultation V2518-22, dated 7 December 2022, has ruled for the first time on the treatment in Personal Income Tax of the regularization of RETA contributions paid in the previous year, provided for in the new contribution system for the self-employed approved by Royal Decree-Law 13/2022, of 26 July.
With the entry into force on 1 January 2023 of the new contribution system in the Special Regime for Self-Employed Workers (RETA) approved by Royal Decree-Law 13/2022 of 26 July, many doubts, interpretations, and unresolved questions have arisen among all those who are directly or indirectly related to the new contribution system for the self-employed.
It should be remembered that under this new system, contributions are paid on the annual income obtained in the exercise of economic activities, and one of the biggest doubts that “assail” the self-employed (corporate or otherwise) is to know what tax obligations or procedure they should follow if, once the financial year is over, the TGSS, at the request of the information on annual income provided by the State Tax Administration Agency (AEAT) itself, proceeds to regularize their contributions for having paid the annual income obtained in the exercise of economic activities, proceeds to regularize their quotas for having entered a greater amount than would correspond to their income (resulting in an amount to be returned) or having contributed for a lower amount than what, according to the approved tables, would be equivalent to the income received (resulting in a higher amount to be quoted).
The computable income from each of the activities carried out by “the self-employed” will be calculated in accordance with the Personal Income Tax regulations for calculating the net income.
In this regard, it could be asked whether, due to these higher amounts to be paid or refunded because of the regularization “suffered” by the self-employed, a complementary declaration should be made to the Personal Income Tax Settlement presented between April and June, or perhaps a rectification of this?
It will be important to distinguish whether these self-employed workers have imputed the RETA contributions for which they have paid contributions as a deductible expense in the income classified as economic activities in direct estimation or as deductible expenses of employment income, as it will be in these sections of the tax return where they will have to act subsequently.
Attention. The bases chosen will be provisional, until they are regularized according to the annual income obtained and communicated by the AEAT from the following year for each self-employed worker.
DGT’s approach
The DGT, with its binding consultation V2518-22 of 7 December 2022, clarifies without a doubt how the self-employed worker should act in each situation. For the DGT, with the new RETA contribution system, despite the fact that the regularization carried out in the subsequent year results in different amounts depending on the actual income obtained, the amounts paid as RETA contributions in the previous year cannot be considered as amounts incorrectly paid, as they correspond to those legally required, as the Law establishes that an initial payment is made based on the estimated income, and in the following year an additional payment or refund is made based on the actual income obtained..
Thus, on the understanding that these provisional contributions are legally calculated for the previous year, it must be concluded that “the self-employed”:
- It shall not be required to submit a rectification of a self-assessment or a supplementary declaration.
- If, because of the adjustment, an additional amount must be paid in the following year, this will be charged as a higher deductible expense for social security contributions corresponding to that same year.
- If the self-employed person receives a refund because of the adjustment, this will be charged as a reduction of the expense for the year for social security contributions paid. If the amount to be refunded exceeds the social security contributions paid, the amount of the excess of the amount to be refunded over the contributions paid must be reflected as a higher income (whether the contributions were charged as a deductible expense of the net income from the economic activity in direct estimation or of the income from work).
For further information, please contact Tax Consultancy
