Annuity and minimum, compatible

Shared custody

For years, most marital separations have been resolved through shared custody, where parents take turns caring for the children. Regarding child support annuities, the situation is as follows:

• With shared custody, child support annuities should not accrue, in theory, in favor of the children (precisely because there is parity in custody).
• However, if one of the spouses is financially struggling or there is a significant economic imbalance, many judges require the other to meet these annuities.

In this situation, one might wonder if the payers of these annuities can simultaneously apply the two existing incentives for these cases: on one hand, the minimum for dependents applicable when living with the children; and, on the other, the reduction of progressivity that the law provides when paying these pensions.

The opinion of the Tax Agency

So far, the Tax Agency has been against this compatibility, as it considers that it contravenes the provisions of the regulations. According to the Personal Income Tax law, the incentives applicable to child support pensions are reserved for those taxpayers who do not have the right to the minimum for dependents . Therefore, the Tax Agency interprets that if a parent lives with a child and has the right to the minimum, they cannot apply the incentives of the child support pension.

Well, a taxpayer disagreeing with this criterion has brought the matter before the Supreme Court, and it has ruled in their favor…

The incentives are compatible

According to the Supreme Court, both incentives aim to protect families and promote the co-responsibility of parents. Thus, they can be applied in the same tax year depending on the time during which there is effective cohabitation between parent and descendant, so that both regimes do not overlap .

Thus, in the case judged by the Supreme Court – in which, by virtue of a judicial resolution, the affected parent lived with their child 50% of the year –:

• For the part of the year in which there is cohabitation with the child, a percentage equal to 50% of the minimum for dependents can be counted.
• And, for the part of the year without cohabitation , the parent who pays child support can benefit from the entirety of the annual payments made under the special regime applicable to child support (according to the court, such payments precisely cover the child's needs for that part of the year).

The Supreme Court also argues that preventing the application of the special regime of child support to the parent who can benefit from the minimum for descendants (due to shared custody) would place that parent in a worse situation than another who is limited to paying child support and does not live with their children . This would go against the objective of family protection that these incentives pursue.

If you find yourself in this case and have not benefited from incentives in your income tax for child support payments in recent years, correct your income tax declarations for the last four years and request a refund of undue payments.

 

If you have to pay a compensatory or child support pension, consult us. We will advise you on how to act to achieve the greatest tax savings in your income tax.