The equalization of common-law couples to marriages is an issue that has been dealt with in court on many occasions, most of the time to equalize both situations.
In the same way that the Personal Income Tax Law (LIRPF) provides that compensatory pensions set in favor of one of the spouses of the marriage may be subject to a reduction in the taxable base of the tax, they must also be so in couples in fact.
This is how the Superior Court of Justice of Catalonia has just sentenced him, which has annulled the provisional settlement issued by the Tax Agency (AEAT) to a man who had deducted from his declaration the amount paid to his ex-partner. You can consult the text of the sentence here.
The plaintiff had formalized a de facto union in Catalonia for some years and they had two children. When they decided to separate, they agreed to a financial compensation of 100,000 euros in favor of the woman because she had worked for the house more than her ex-partner and had also fully cared for the children.
When he had to present the income statement, the man reduced the taxable base of the tax with the amount given to his ex as “economic compensation for work reasons” and the AEAT denied it because he understood that the reduction is only foreseen for compensatory pensions and annuities for alimony in marriages and not in common-law couples.
However, the court understands that the tax rules have to be interpreted in accordance with the reality of the time in which they are to be applied. And in this sense, it concludes that the members of a stable de facto couple are equated for these purposes to the spouses of a civil or canonical marriage.
But, in addition, the Catalan Civil Code (applicable in this specific matter since it is a couple established in Catalonia) provides for an almost absolute equalization between the cohabitants of a stable couple and the spouses when they live together for more than two uninterrupted years, or when have a child in common or formalize the relationship in public deed. For this reason, it is irrelevant that the couple in this matter is not registered in any public registry since, as the judge insists, Catalan de facto unions can prove their coexistence by any means of proof admitted in Law and registration is to the mere advertising effects.
Having solved the issue of the equality between de facto unions and marriage, the court agrees that the amount that the man gave to his ex after the separation is deductible from the income tax base as income from work, since it is not a capital gain.
Keep in mind that compensation for work reasons only exists in the Catalan Civil Code and is different from compensatory pension, you can even collect both at the same time. The first arises in favor of the member who has contributed to the burdens of the marriage or de facto partner with domestic work. On the other hand, the compensatory pension tries to help financially the member who is harmed after the dissolution of the relationship.
On the other hand, it is also important to distinguish for tax purposes income from work and capital gains in marriage. One thing is the sum of money that one of the parties gives to the other when they liquidate the common goods to remedy that there has not been an equal division, in which case the money received would be taxed as capital gain; and another very different one is the one that has been dealt with in this judicial resolution in which the economic compensation that the woman received derived from a job that was not remunerated during the time that the couple lived together.
In conclusion, the amount that the man gave to his ex tried to compensate for the insufficient or non-existent remuneration for domestic work carried out by the woman and therefore, we are dealing with a work performance that can be deducted from personal income tax.