How not to pay taxes

Payment in kind of up to EUR 100 thousand/year per company and employee for contributions to company pension schemes

Knowledge comes primarily from living. Secondly, from analysing the conclusions reached by others who have studied the issues previously. In my view, the truth is still elusive. For this reason, I think the exception is more interesting than the rule and now that we are at the start of the period for filing Personal Income Tax returns for the 2022 tax year, today I am going to speak about the article by Expansión (Spanish economic and business newspaper) and ARAG (Spanish insurance company specialising in legal defence) about their guide containing practical advice.

Over fifty paragraphs written with only one about earned income. That is to say, all the income received from an employer, whether monetary or in kind, for performing a specific activity as an employee or professional and provided that there is a contract or employment relationship. No mention of payment in kind of up to EUR 100 thousand/year per company and employee for contributions to company pension schemes. If no tax is deducted at source, the employee should not be taxed. This means that personal income tax is not considered as taxable earnings from employment and, accordingly, the tax saving may entail the marginal rate, which will differ according to the Spanish Autonomous Community of residence. Expressed in euros, this means receiving EUR 100 thousand and paying this amount into your retirement, survivor and/or disability benefit scheme without paying any tax. Or in other words; if the marginal rate is 50%, the State is financing EUR 50 thousand of our company pension scheme.

The feeling of distance between the elite and the rest must be maintained at all costs. Otherwise, those currently in a position of privilege with the above-mentioned tax advantage, would end up mixed with the rest and “lessened” according to the article, in its paragraph on this relatively new development, according to the Spanish General State Budget Law. It states that “the rebate on contributions to company pension schemes for 2022 has gone from EUR 2 million to EUR 1.5 million.” It is obvious that this refers to personal pension schemes and bears no relation to what I have told you.The article prefers to devote one of its 10 practical recommendations to how a primary residence is taxed rather than even make a passing reference to the taxation of personal pension schemes in the sphere of employment relationships. Fortunately, there are increasing numbers of employees who receive lifetime annuities instead of withdrawing the total amount of the accumulated pension fund. There are several advantages. The most important are: Ensuring you receive a pension as long as you live. In the event of death, benefitting the surviving spouse with a pensions that will compensate the loss of state household income. Also paying far less in tax and guaranteeing the profitability of accumulated savings for life.

Jaume Quibus

The actuary and economist Jaume Quibus holds a master’s degree in Financial Economics and Accounting, a degree in Actuarial and Financial Sciences, a degree in Economic and Business Studies from the University of Barcelona and has completed the Management Development Programme at the IESE Business School of the University of Navarra. He is a full member of the following associations: the Catalan Actuarial Association, the Spanish Actuarial Association, the Catalan Economists Association, the International Actuarial Association, the Catalan Association of Accounting and Management and also a member of the IESE Business School Alumni. He was a founding partner in 1998 of the actuarial company Quibus, and is corporate member number 6 in the Catalan Actuarial Association.