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New corporate income tax deduction for contributions to employee retirement plans

The recently issued Law 12/2022 of 30 June, stipulates that a new Corporate Income Tax deduction has been created, applicable to business years starting on or after 2 July 2022, for companies that make contributions to company pension plans.

Corporate income tax deduction for contributions to company pension plans

Specifically, a deduction of 10 per cent of the gross tax payable is introduced for company contributions to company retirement schemes attributed in favour of employees (new article 38.ter LIS).

More and more companies are becoming interested in the possibility of setting up company pension plans, as the government wants to promote this option, as opposed to contributions to personal pension plans.

You should therefore be aware that if your company is thinking of starting to pay its employees in kind through one of these company plans, then the following topics must be considered:

  • Expense. Like any other sort of remuneration, the contributions made to the retirement plan will also be a deductible expense for the company in the Corporate Tax.

  • No taxable income. Likewise, if your company respects the established contribution limits, you will not have to pay any income on account of the IRPF= employees' personal income tax. Remark. You must declare the annual contributions to the plan using form 345 (and not form 190).

  • Retirement plans are taxed. Contributions to pension plans pay Social Security contributions (unless the worker to whom they are attributed is already paying contributions at the maximum rate).

New Corporate Tax Deduction on corporate tax for company contributions to employee retirement plans

A new corporate tax deduction has been approved for companies that make company contributions to these retirement plans. Remark. This deduction is up to 10% of the amount contributed, and will be applicable to business years starting from 2 July 2022 (i.e., in most cases it will be applicable from 2023).

Basis of deduction. The base for this deduction (the amount on which the 10% deduction is applied) is as follows:

  • In the case of contributions in favour of workers with gross annual remuneration of less than 27.000 euros, the basis for deduction is the total amount of the contributions.

  • In the case of employees with a gross annual salary of EUR 27,000 or more, the deduction applies to that part of the contributions which is proportional to this amount.

Let us view an example:

What would be the deduction applicable in Corporation Tax for an entity that contributes 250 euros/month (3.000 euros per year) to an occupational retirement plan when the worker has a gross remuneration of:

  • 25.000 euros.

  • 30.000 euros.

  • 40.000 euros.

  • 60.000 euros.

Figures are outlined as per the following scheme:

Incentives on Social Security contributions for employer contributions to employee retirement plans

You should also be aware that, from 2023 onwards, these company contributions would benefit from incentives in Social Security contributions, so the savings obtained can be even higher.

Do you want to take advantage of this system corporate tax deductions? Just contact us! Our Tax Department will be delighted to help you.


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