Dylan Wagemans
A SPANISH Supreme Court ruling has said that many pensioners can receive compensation that can exceed €4,000.
The reason for the compensation is because many Spanish workers got taxed wrong between 1967 and 1978.
Workers were taxed on their entire pension, even though it should have only been around 75%.
This generated a stir in important sectors such as banking, commerce and construction.
What went wrong?
Before Social Security as we know it was consolidated in Spain, there were mutual insurance companies.
These entities, which operated under the umbrella of the Ministry of Labour, managed workers’ pensions through contributions made by them during their working lives.
The system, however, did not allow tax deductions for these contributions, which meant that, when the worker retired, he was taxed in full on the pension he received.
This changed with the transition of the model between 1967 and 1978, when mutual societies were progressively integrated into the general Social Security system.
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From that moment on, contributions began to be considered deductible for personal income tax purposes.
The problem is that many workers (and, above all, the Treasury) did not apply this change correctly.
Thus, thousands of pensioners continued to pay taxes as if all their contributions had not been deductible, paying taxes on 100% of their pension when they should only be taxed on 75%.
The error has now been acknowledged by the Treasury, and the Supreme Court has ruled that these workers need to be reimbursed.
