The nearly four million workers affected by an ERTE from Covid-19 could be scared next year when they file their income tax returns. The reason is that, for tax purposes, they will have two payers in the 2020 personal income tax campaign, with the practical consequences that this usually has. The first problem is that, surely, they will have to present the declaration, even when their income does not exceed the legal limit; the second is that it will probably pay you. Experts warn about this issue, which may have gone unnoticed by many workers who have been forced into an ERTE.
Changing jobs, combining jobs or becoming unemployed are the usual situations in which workers receive income from two or more payers in the same year. This circumstance influences, in the first place, the tax obligations of the taxpayer, and, furthermore, may affect the result of the tax return at the time of its presentation.
When is there a second payer?
As a general rule, explains Marcos Escoda, a tax expert at Marimón Abogados, it is considered that there are two or more payers for tax purposes “when income is received from entities that have different tax identification numbers (NIF).”
Unemployment benefit is, like payroll, income from job performance, and Social Security is considered one more payer for tax purposes. This same rule applies to benefits received by workers at ERTE. As confirmed by Miguel Ángel Galán, partner of Andersen Tax & Legal, “if SEPE or another public body satisfies us with any remuneration, it is considered to be a payer for personal income tax purposes”.
Other cases in which the Administration becomes a second payer are, for example, when the worker retires once the year has started, or when he receives benefits from FOGASA (Salary Guarantee Fund) because his company is insolvent.
They will have an obligation to declare
Having been affected by an ERTE by Covid-19, it can suppose that a worker who, under normal conditions would be exempt from filing the income tax return, has to fill it out. Without taking into account other assumptions, the law establishes that there is only an obligation with the treasury if 22,000 euros or more are paid as income from work during the year. However, this limit drops to 14,000 euros when the worker has received from two or more different payers, and, in addition, the amount paid by the second (and other payers) exceeds 1,500 euros.
It is relatively easy, therefore, that those workers who have been for two or three months in an ERTE have an obligation to file the income tax next year despite having an income of less than 22,000 euros.
One of the most common problems of having two or more payers in the year is that the result of the income statement returns positive numbers. It is quite frequent in cases of receipt of wages and unemployment or other benefits during the same tax period. “You have to see the specific case, but yes, it could go out and pay,” Galán predicts regarding the workers at ERTE.
Having two or more payers does not imply having to pay more personal income tax, but it can mean that an adjustment must be made with the treasury when the return is filed. In the end, the result depends, among other things, on whether the employer has withheld the appropriate percentage in anticipation of payment of the tax on the worker’s payroll.
The issue is that the second or subsequent payers calculate the withholding that they apply to the payroll based on the compensation they will pay until December 31. By not taking into account everything that the worker receives throughout the year, they will normally have a lower withholding rate than would be the case if all that had been previously charged was taken into account, explains Leandro Sequeiros, a partner at Lean Abogados.
As the SEPE (Public State Employment Service) applies a minimum withholding on the money paid to workers in unemployment or in ERTE, it is probable that the amounts not withheld will have to be adjusted with the Treasury at the time of making the income statement , that is to say, that this one leaves to pay.
Unless a new type of withholding is communicated to the new employer that takes into account what he has earned up to that date and what he will earn from then until December 31, explains Sequeiros, “the normal thing is that you go out to pay in the statement of income”.
However, Galán points out, we must not lose sight of the fact that, in the end, the same taxes are paid for the same income. It is, he explains, “a matter of liquidity and financial effect”, what is known in tax law and economics as the theory of financial illusion.
Can I stop him from paying me?
Regardless of the circumstances of each taxpayer, workers who receive income from two or more payers can ensure that this fact does not harm them in their income statement.
One way to avoid the consequences of applying a lower withholding on this income is to request the second payer to modify the rate. According to Sequeiros, there are specific forms, depending on the administration from which the income comes, through which a type of voluntary withholding higher than that calculated by the administration itself can be communicated.
However, the new type of withholding requested will apply, at least until the end of the year. In addition, it will remain in force in subsequent years if it is not waived in writing or another superior is requested. On the other hand, if, finally, the statement comes out, it is important to remember that the Treasury allows the personal income tax to be divided into two payments.
The possible negative tax consequences of being included in an ERTE have not gone unnoticed by the tax advisers, who have submitted their proposals in this regard.
The Spanish Association of Tax Advisers (AEDAF) circulated a note a few days ago proposing that these incomes be exempt for, they explained, “trying to ensure the liquidity of these people who see their income reduced to 75% of the contribution base.” On the other hand, they advocated establishing an express exception so that the application of the ERTE did not suppose the existence of two payers for the purposes of the tax, and thus avoid that many taxpayers have the obligation to file a declaration in addition to the withholding adjustment problem.