The Supreme Court resolved a long legal dispute by issuing a final ruling on February 28, 2023 that established a clear precedent aligned with retirees’ interests. As explained by Daniel Smooth, a lawyer with the Zaragoza firm Constitución Abogados who handles claims related to this matter, retirees who began work before 1979 are advised to set aside 75 percent of their pension as income on their tax returns. This guidance reflects how the court’s decision translates into practical tax treatment for those retirees and their families.
Spain is now recognizing an opportunity for thousands of retirees to correct income tax returns for years where the IRS-like agency data did not reflect the actual situation, typically covering years since 2018. Retirees may request refunds of amounts that were overpaid or incorrectly assessed by the tax authorities, and this process is being described as a chance to rectify past unfair charges.
Labor Mutual
The backbone of this new framework rests on contributions from employees of various banking institutions who were linked to the Mutualidad Laboral de la Banca until January 1, 1979. These contributions are part of the social security system, and experts emphasize that mutual contributions were not deductible as an expense for personal income tax in those years. If they were treated as income, it could lead to double taxation. This cautionary note comes from Sandra Domingo, a tax consultant at Constitución Abogados, who stresses the need for accurate accounting and informed claims.
The same rules apply to Telefónica retirees. Under Temporary Provision 2 of the Personal Income Tax Code, Attorney Daniel Liso notes that interested parties should file to reclaim excess contributions within prior years. He warns that the 2018 tax year is approaching prescription, underscoring the importance of timely action in pursuing refunds.
The refunds retirees may claim from the tax office vary based on individual circumstances. Being able to pursue several tax periods can be crucial. The team at Constitución Abogados has spent weeks preparing and submitting these claims, encouraging affected retirees to use the opportunity to seek redress for past taxation that may have been misapplied.
The tax office is currently reevaluating both the penalties and the scope of these issues. At present, there is no precise estimate of how many retirees fall within the affected group. The dispute, which took four years to resolve in court, began in Extremadura when the Supreme Court of Justice of this autonomous community ordered the recovery of sums that the treasury had improperly collected from bank retirees. The Supreme Court considered the objection raised by the Office of the Chief Public Prosecutor against the prior sentence and ultimately rejected it, signaling a broader potential for refunds across the country. (Constitutional and judicial sources)