The General Directorate of Taxes resolves a consultation (V0197-16) of January 20, 2016, in which the possibility of exemption in the Wealth Tax,with respect to the possession of some social participations, for an Administrator, majority owner of the company who receives a remuneration for his managerial functions, and who is also independently the recipient of a retirement pension.
Compatibility of the retirement pension and the receipt of remuneration as an administrator of the company.
The fact that being a recipient of a retirement pension does not imply that there is an incompatibility with the receipt of salary for being an administrator of the company, the TGSS allows limited and fulfilling a series of requirements the compatibility of the perception of both.
The main limit is that self-employed income cannot exceed annually, the amount of the minimum interprofessional salary, contributing for this remuneration only for temporary disability and professional contingencies, as well as a small percentage as a special contribution,not generating these contributions additional rights with the Social Security.
Since March 2013, a series of requirements were established that regulated this type of case, and that limit the compatibility of retirement pension and external remuneration, such as that the recipient of the retirement pension must have requested it when completing the retirement age, that is, those subjects who opted for early retirement are excluded, and that in addition, the amount to be received from a retirement pension during the time that the salary is received will be limited to 50% of the calculated base.
Exemption from wealth tax.
In the case that concerns us about a majority shareholder and administrator who receives remuneration for his managerial functions, the right to exemption from wealth tax is regulated in the Article 4.8.2 of Law 19/1991,of June 6, regulating the tax, which establishes that the following will be exempt from the tax:
“Full ownership, bare ownership and the right of usufruct for life over shares in entities, listed or not listed on organized markets, provided that the following conditions are met:
- a) That the entity, whether or not it is a corporate, does not have as its main activity the management of movable or immovable assets.
- b) That the participation of the taxable person in the capital of the entity is at least 5 per 100 computed individually, or 20 per 100 jointly with his spouse, ascendants, descendants or collateral of the second degree, whether the kinship originates in consanguinity, affinity or adoption.
- c) That the taxable person actually exercises management functions in the entity, receiving for this reason a remuneration that represents more than 50 per 100 of all business, professional and personal work income.
For the purposes of the above calculation, the income from the business activity referred to in number 1 of this section shall not be counted between business, professional and personal work income.
When the participation in the entity is joint with one or more persons referred to in the previous letter, the management functions and the remuneration derived from it must be fulfilled in at least one of the persons of the kinship group, without prejudice to the granted of all of them being entitled to the exemption.
The exemption will only reach the value of the shares, determined in accordance with the rules established in article 16.one, of this Law, in the part that corresponds to the existing proportion. between the assets necessary for the exercise of the business or professional activity, reduced in the amount of the debts derived from it, and the value of the net worth of the entity, applying these same rules in the valuation of the shares of investee entities to determine the value of those of its holding entity”.
Article 3.1 of R.D. 1704/1999 should be added to that article. determining the requirements and conditions of business and professional activities and holdings in entities for the application of the corresponding exemptions in the Wealth Tax, which establishes that the exemption will only apply to the taxable person who exercises the activity on a regular basis, personal and direct, provided that this activity constitutes its main source of income. The exemption shall also apply to the spouse of the taxable person in the case of common elements related to an economic activity carried out by the taxable person.
For the purposes of this article, it is considered the main source of income that at least 50% of the taxable base of Personal Income Tax comes from net income from the economic activities in question, referring to the requirements established in article 5.1 of the same law, which in a similar way to article 4.8.2 of Law 19/1991, seen above, it establishes the “conditions of the exemption in the cases of participations in entities”.
For this case, we would be facing the exemption of the wealth tax for the ownership of the shares, if the administrator that performs managerial functions due to his status as an administrator, and that he receives a remuneration for it, if such remuneration he obtains is greater than 50% of all business, professional and personal work returns.
The retirement pension that the subject also receives would be included within these incomes, so the remuneration received by the company would have to be more than half of the retirement pension he currently receives, otherwise the subject should be taxed for the ownership of the shares in the wealth tax.