Cohabitation and the individual and family minimum personal income tax (“IRPF”) deduction

28 March 2012

On March 12, 2012, the Official State Gazette published Constitutional Court ruling dated February 15, 2012 following an appeal alleging the unconstitutionality of various precepts of IRPF Act 40/1998 dated December 9th (replaced by the current law, Act 35/2006 dated November 28th). The Constitutional Court ruled that the expression “cohabits with the taxpayer and” in paragraph b) of section 1 of Article 40.3 of the aforementioned law is unconstitutional; however, a declaration of nullity is not appropriate.

Said article does not attribute the right to the minimum individual and family deduction on the personal income tax base to those who pay child support, but rather to the parent with whom the dependents live, and establishes the criteria of cohabitation and not economic dependence as the determining factor for entitlement to the deduction. This issue is especially relevant as it is quite common nowadays for progenitors who do not, or cannot, live together with their children to be obligated by law to pay child support.

Article 39.3 of the Spanish Constitution obligates, on the one hand, parents to provide assistance of all kinds to their minor children and, on the other hand, the public authorities to ensure economic safeguards for the family. Furthermore, the Constitutional Court indicates that the legislator must guarantee said protection without discrimination, and that all progenitors who provide assistance to their children, either by constitutional or legal obligation resulting from the separation, should benefit.

Therefore, the Constitutional Court found the expression “cohabits with the taxpayer and” in the aforementioned rule to be unconstitutional as it is not in line with the final objective of same, that is the protection of the family through a deduction for a portion of childcare expenses from the IRPF tax base intended to protect all economic dependents.

As mentioned before, the final provisions of the ruling stated that it was inappropriate to declare the appealed rule null and void, not just because the challenged rule had already been repealed when the ruling was issued, but rather because the elimination of the aforementioned sentence would imply that both parents were automatically entitled to the minimum family allowance for single children under the age of twenty-five – whether or not they actually provided assistance to their children – and this goes against the objective of the rule.

For further information, please contact María Blanco: [email protected]