People On ERTE To Be Allowed To Pay Income Tax In Six Monthly Installments

SPAIN to allow people on ERTE to pay their personal income tax in six monthly installments without incurring interest

The Ministry of Finance in Spain has announced that, in the coming days, a new regulation will be finalised that will allow people affected by a temporary employment regulation file, or ERTE, to split their personal income tax payments over a period of six months without accruing additional interest. More than 3.5 million employees in Spain were placed on the ERTE furlough scheme when the coronavirus pandemic hit.

Individuals in receipt of an ERTE payment will have a period from July 20 until December 20 to pay their taxes, according to Spanish daily El Pais.

Aid from ERTE is taxed as income from work paid by an entity other than a direct employer, in this case it is the Public Employment Service (SEPE). Before this new payment method, employees were required to file tax returns on income up to €22,000. Now that there are two sources of income i.e. the actual employer and SEPE, the threshold has been reduced to €14,000 if the income from the second payee was more than €1,500. Because of this, the Tax Agency is expecting around 327,000 new filers this year.

Because of the novel approach this year, the Tax Agency will be sending letters to all tax payers who had an ERTE in 2020 explaining that the payment can now be divided into six equal parts without interest.

At the beginning of February, the European Commission disbursed a third loan to finance public spending on Spain’s ERTE and aid for the cessation of activity of self-employed workers that amounted to €1,030illion. Previously, the Spanish government received €11,030billion from the SURE fund which was created for the Member States to put systems in place to avoid a massive wave of layoffs during the coronavirus pandemic.