Income tax tips 2020
The end of the income tax campaign is approaching, a campaign in which, although we don’t have much news, there are a few things to bear in mind as 2020 income was generated in the midst of the pandemic, which will obviously affect many tax returns.
Key dates for the 2021 income tax campaign
A few weeks ago, the Tax Agency announced the timetable for the 2021 income tax return. The 2020 income tax campaign begins on 7 April and ends on 30 June 2021, but if payment is made by direct debit, the confirmation deadline is 25 June 2021.
ERTE benefits
These benefits constitute taxable income from work, i.e. they are not exempt from personal income tax. Therefore, if a taxpayer has obtained income from work from two different payers during the 2020 tax year, he or she is not required to file a personal income tax return, only if one of the following circumstances applies:
– If the amount received from the second and remaining payers does not exceed €1,500, and the total sum of income earned does not exceed €22,000.
– If the amount received from the second payer and the other payers exceeds €1,500, but the total amount of earned income received during the year does not exceed €14,000.
Extraordinary activity cessation allowance received by self-employed workers
Like “ordinary” unemployment benefit for the self-employed, extraordinary unemployment benefit is a benefit under the unemployment protection system and, in accordance with Article 17.1 b) of the Personal Income Tax Act, unemployment benefit is considered to be income from employment. Consequently, although they originate from the economic activity of the self-employed person, they do not constitute income inherent in that activity and cannot therefore be classified as income from economic activities.
Basic advice for completing your tax return :
Avoid rushing into things: it’s advisable to review your tax return to include rental income, public grants received and all possible tax deductions and reductions. As is the case every year, you should be alert to any changes in regional deductions.
Severance pay for self-employed workers: Extraordinary severance pay is classified as earned income.
Redemption of pension plans: People who were in ERTE or self-employed following the pandemic were able to redeem their consolidated pension plan entitlements, up to the limit of the salaries or net income that they ceased to receive. These repayments are considered as earned income.
Exemption for canteen vouchers when teleworking: From 1 January 2020, the exemption from personal income tax for payments in kind for indirect canteen services has been extended to remote or non-presence-based working. The exemption applies not only to meals eaten by workers in the bar or restaurant itself, but also when they are consumed off the premises, whether they are picked up by the worker himself or delivered to his place of work or to the location chosen by the teleworker.
Ingreso Mínimo Vital: Beneficiaries of Ingreso Mínimo Vital and members of the cohabitation unit are required to complete the declaration.
Rents during the pandemic: Following reductions or postponements in rent payments due to the pandemic, landlords will pass on the new amounts agreed by the parties as income. In any event, the necessary expenditure will continue to be deductible and no property income will need to be imputed during these months as the property will continue to be let.
Entrepreneurs with activities in modules: Because of the pandemic, the reduction has been increased from 5% to 20% (35% for the tourism, hotel and trade sectors) of the net income from the activity in 2020. In addition, the days of inactivity during which the state of alert was declared in the first half of 2020 and the days in the second half of 2020 during which economic activity was suspended due to the restrictive measures adopted by the autonomous regions are not included in the calculation of annual income. Finally, the waiver of the EOM method for personal income tax, the simplified regime and the special VAT regime for agriculture, livestock farming and fishing is only permitted for one year (and not three) in 2020 (as is the case in 2021).
Deduction for donations: The government has approved an increase in the tax deduction for donations made from January 2020 to 80% of the first 150 euros donated and 35% of the rest of your contributions, rising to 40% if the amount donated to the same NGO has not decreased in each of the last three years. In addition, donations to the Treasury made exclusively to finance expenditure relating to the health crisis caused by COVID-19 will also benefit from these increased rates.
Maternity deduction: Mothers of children under the age of three who are entitled to the minimum for descendants may receive up to €1,200 per year for each child under the age of three, provided they are self-employed or employed and registered with the relevant social security or mutual insurance scheme. Advance payment on a month-by-month basis is permitted. However, mothers on suspended ERTE are not entitled to this deduction during the months when they are on ERTE. This exclusion does not apply to mothers on ERTE with reduced or part-time working hours.
With regard to the deductions for large families, for ascendants with two children and for the disability of descendants, ascendants or spouses, both self-employed or employed taxpayers and those receiving contributory and social benefits are entitled to these deductions. Consequently, people receiving ERTE or contributory unemployment benefit or unemployment allowance are entitled to these family deductions, also during the months in which the allowance or benefit is received.
