Many workers were in ERTE during 2020 due to the impact of COVID-19. We analyse its possible effects on the Income Tax Return.
During 2020, many workers were affected by an ERTE due to the pandemic situation derived from COVID-19. With the arrival of the income tax campaign, the vast majority of these workers who have received unemployment benefits and, therefore, have had two payers (the company itself and the SEPE -Servicio Público de Empleo Estatal-) will be obliged to file a tax return. It should be remembered that ERTE benefits are employment income subject to personal income tax and, therefore, not exempt from taxation.
Added to this situation, for this group, is the problem of having received payments from the SEPE that in many cases were inappropriate, i.e. the receipt of an undue payment or a payment other than the one to which they would have been entitled.
In relation to the above, there is no obligation to declare in general, if a worker receives income from work of no more than 22,000 euros per year and works for only one company. Therefore, workers who were not affected by an ERTE (and, therefore, did not receive unemployment benefits) whose gross annual salary did not exceed 22,000 euros are not obliged to file the 2020 tax return.
However, if a worker was affected by an ERTE last year and received unemployment benefits, he will have received wages from two or more payers. In such a case, he/she will be obliged to file a tax return if his/her total income (adding salary and “unemployment”) exceeded €14,000 and if the sum of the income from the second and subsequent payers exceeded €1,500.
Remember that the SEPE is not obliged to withhold when the amounts paid during the year do not exceed 14,000 euros. However, the worker may request at the time that a higher percentage of withholding be withheld or applied, more in line with the actual taxation that he/she must pay based on the overall income for the year.
In most cases, employees with two payers will have had very low withholdings. This means that, when filing their tax return, they will have to pay the IRPF tax that they will not have paid during the year with the withholdings, as the withholding rate is calculated independently for each payer, according to the remuneration they will pay (without taking into account the remuneration paid by the other payer). Therefore, the lower the remuneration paid by each payer, the lower the withholding will be.
It should be borne in mind that the withholdings, insofar as they may be adjusted to the worker’s income for the year as a whole, simply anticipate the tax that the worker must finally pay. The worker who is not obliged to declare also bears the IRPF through the monthly withholdings.
On the other hand, the reduction in the amounts established for being obliged to declare when there are two payers is established so that two workers with the same income from work subject to personal income tax pay the same final tax, regardless of the number of payers. This is because personal income tax is a progressive tax, i.e. the rate increases if the declared income increases.
To this end, and in order to mitigate the “extraordinary” tax impact on those workers affected by ERTE who are obliged to declare and who have had very low withholdings or none at all, an extraordinary interest-free splitting of the IRPF payment in the income tax return has been approved. Those workers whose income tax return is paid in and who avail themselves of this extraordinary deferment may extend the payment of their personal income tax in six instalments, due on the 20th of each month, with the first payment due on 20 July 2021.
Receipt of undue or erroneous income from unemployment benefits
The worker’s situation in the event that the SEPE has made a payment in excess of that which corresponds, for the purposes of the Income Tax Return, will be different depending on whether the SEPE has already initiated/completed the file for reimbursement of this excess at the time the worker submits their return, or whether the reimbursement file has not yet been initiated.
In the latter case, if the worker can know the amount to be refunded to the SEPE, he/she will be able to file the return with a result, in terms of final tax, equal to the amount actually due.
The Tax Agency recommends that if the worker does not know the amount to be refunded, he/she should consult the SEPE about the exact or approximate amount of the refund to be made. Alternatively, they can wait for the Income Tax Campaign to progress, thus increasing the possibility of receiving notification from the SEPE with the amount to be refunded.
The Tax Agency has been in contact with the SEPE in order to receive files with regularly updated data, as the SEPE is processing files for the refund of amounts paid in excess. It should be borne in mind that the Tax Agency updates the information available from the SEPE periodically, so that the worker will be able to know throughout the campaign if the information has been modified.
In relation to this problem, there are two basic cases:
that the refund of the overpayment by the SEPE has already taken place in 2020. In this case, the Tax Agency will already have the correct amount in the tax data and the worker will file their tax return normally without having to request subsequent rectifications.
Or the refund of the overpayment by the SEPE did not take place in 2020. In this case it is necessary to distinguish between two alternatives:
- the SEPE has already started the regularisation procedure: the SEPE will communicate this to the Tax Agency and in the tax data the Agency will inform the worker of the two amounts, the amount initially paid by the SEPE and the amount of the refund already made, or pending to be made by the worker to the SEPE. If the worker agrees with the amounts to be refunded to the SEPE, he/she will submit his/her return normally, without having to request subsequent rectifications.
- The SEPE has not initiated the regularisation procedure: in this other case, if the SEPE has informed the Agency that it has detected amounts unduly received, the Tax Agency will inform the worker through the tax data that there is an amount pending refund to the SEPE, but it will not be able to specify the amount as it does not know it. The contingency will appear as unduly received amounts paid by the SEPE for ERTE, but without an amount.
AddVANTE remains at your disposal for further information or to answer any questions that may arise in relation to this article.