The taxation of contributions made to individual pension plans (PPI) and Insured Pension Plans (PPA) during this year, the effects of which will be felt in the tax return to be filed next year, have undergone significant changes with the announcement of changes to the limits on contributions and deductions.
Summary of changes in the taxation of pension schemes
- Until now, contributions to pension plans applied a discount in the IRPF taxable base with a limit of 8,000 euros per year. With the tax changes approved by the legislator for the following year, the limit is reduced to 2,000 euros per year.
- This is a limit:
- Absolute, a taxpayer may not personally contribute more than EUR 2,000 in aggregate to such financial instruments.
- Set per contributor (in common territory) that applies to all contributions to social welfare systems (individual pension plans, PPAs, occupational pension plans, company social welfare plans and mutual social welfare funds).
- This maximum amount of 2,000 euros can be increased by up to an additional 8,000 euros (10,000 euros in total) for employer contributions on behalf of the employee to company social welfare instruments (such as occupational pension plans, company social welfare plans and mutual social welfare funds). In these cases, the amount is a maximum of 30% of the net income from work.
- In the case of contributions to pension plans in which the holder is the spouse, the maximum contribution limit is reduced from 2,500 to 1,000 euros per year when the spouse does not obtain net income from work or economic activities or obtains less than 8,000 euros per year.
With these changes, are pension plans still attractive?
Despite this reduction in the tax incentive and other changes in the taxation of pension plans, contributions still have an immediate tax benefit and a future benefit, the need to save for retirement is more relevant than ever with the progressive increase in life expectancy. Thinking now about how we can supplement the public retirement pension is critical and a decision we will never regret.
Taxpayers who were making contributions above 2000 euros per year should look for other tax planning and savings instruments. For example:
- Investment funds that match your investment profile.
- Individual Systematic Savings Plans (PIAs).
We can help you with tax and savings planning to maximize future savings without penalizing your burden as a taxpayer.
Get in touch with us.