Regulations on taxation and concubinage: a breakdown of the guidelines
Unregistered Relationships and Tax Rules
Living as an unmarried couple, known as concubinage or common-law relationships, has specific tax implications. For tax purposes, such partners are treated as separate tax entities, not offering the same benefits as those in marriage. Here's how to file your tax return in this situation.
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Table of Contents
- Are unregistered relationships taxable?
- What's the difference between a free union and cohabitation?
- Is it mandatory to disclose cohabitation to the tax office?
- What are the advantages of disclosing cohabitation for taxes?
- What are the consequences for income tax with cohabitation?
- Property Tax and Cohabitation
- Real Estate Wealth Tax and Cohabitation
- Land Tax and Cohabitation
- How to report cohabitation for taxes?
- Tax Reduction or Credit: Can you benefit from it in cohabitation?
Are unmarried relationships subject to taxes?
Definition of Cohabitation
Cohabitation, or living together, is defined as the permanent and unmarried union of two adults between the same or opposite sexes. This relationship lacks a legal family bond through marriage or a civil solidarity pact (PACS).
Independent Legal and Financial Status
Unlike marriage or PACS, cohabitation does not generate a unique legal or financial status for partners. Each individual maintains full autonomy, unless they voluntarily agree on shared responsibilities, such as co-owning property.
Single Taxpayer Status
From a fiscal standpoint, partners in a cohabiting relationship are considered single taxpayers. Each individual files their income tax separately, with no option for joint filings like married or civil partners.
What's the difference between a free union and cohabitation?
Although often used interchangeably, there is a nuanced distinction. A free union is a more general term, describing two people residing together, while cohabitation refers to the legal category that assumes continuous and stable cohabitation recognized by law.
Is it necessary to inform the tax office about cohabitation?
No Mandatory Disclosure
It is not compulsory to inform the tax office about cohabitation, unlike with PACS or marriage. Each partner files their income tax individually, reporting their income and expenses separately.
Social Assistance
If a partner receives specific social assistance (such as activity bonuses or family allowances), they must declare their cohabitation status, as it affects their entitlements. Certain categories in the tax return (e.g., attachment of children or registered dependent) may also necessitate disclosing cohabiting partners.
What are the advantages of disclosing cohabitation for taxes?
Tax Relief
Declaring cohabitation can enable partners to benefit from certain tax reliefs. For example, the tax relief on income tax can alleviate the burden for taxpayers with modest incomes. The amount of tax relief depends on the partner's income and is designed to prevent over-taxation.
Tax Credits and Deductions
If the partners have children or share expenses, this could be considered in certain tax credits or deductions, like the tax credit for dependent children. Each partner may also be eligible to claim specific expenses, up to an annual cap, for a total of 20,000 euros for the couple, maximizing their tax deductions.
What changes for income tax with cohabitation?
In a cohabiting relationship, each partner files their income tax separately and can only benefit from their own personal allowances, without the possibility of shared charges, as with married or civil partners.
Impossibility of Joint Filing
Each cohabiting partner must individually submit a personal income tax return. A joint tax return is unavailable for cohabiting partners, as it is exclusively offered to married or civil partners.
Declaring Children when Cohabiting
In cases where cohabiting partners have children, they have the option to declare all minor or dependent children on one partner's tax return or divide them between the partners, with each taking responsibility for a child. A single child cannot be apportioned to both partners. Attaching a child to the partner with the highest income would offer the greatest tax benefits.
Property Tax and Cohabitation
In contrast to income tax and gift tax, the IFI (Wealth Tax) takes cohabitation into account in its calculation.
Real Estate Wealth Tax (IFI) and Cohabitation
Like income tax, cohabiting couples are considered two separate households for IFI purposes. If the combined net real estate value of cohabiting couples exceeds 1.3 million euros, they must submit a joint declaration.
No Solidarity, but Joint and Several Liability
Although the General Tax Code states that cohabiting couples are not solidary for IFI payment, they are jointly and severally liable and are issued a tax notice in both names.
Land Tax and Cohabitation
Personal Land Ownership
Each owner of land is individually liable for land tax. Therefore, each cohabiting partner is responsible for the land they personally own, with the non-owning partner having no tax obligations regarding the property, even if they reside there.
Joint Land Ownership
If cohabiting partners own land jointly, a land tax notice is issued in both partners' names. They are then jointly and severally liable for the payment of land tax. Each partner can be pursued for the full amount in case of non-payment, regardless of their share of ownership.
How to disclose cohabitation for taxes?
For income tax
For income tax, no specific declaration is required to disclose cohabitation. As separate tax entities, each partner must individually file their income tax returns, reporting only their own income and expenses.
No Mandatory Mention of Cohabitation
Disclosing cohabitation to the tax administration is not mandatory. Cohabitation is not a legally recognized status for joint taxation, so no specific boxes or documents need to be filled out for the tax return.
Tax Reduction or Credit: Can you benefit from it in cohabitation?
The provided information does not mention tax reductions or credits in relation to cohabitation.
Separate Benefits
In a cohabiting relationship, most tax credits and deductions are not shareable. Tax credits and deductions (such as donations, energy renovation work, etc.) apply solely to the expense incurred by the person claiming them and cannot be combined or shared between partners.
Shared Expenses
Although not easily combined or shared, partners in a cohabitation can declare their portion of shared expenses, provided they can substantiate their distribution. Costs like childcare or shared rent can be attributed to each partner, but proof of an equal or proportional distribution is necessary.
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Relevant to this article: * Income Tax* Tax Return* Income Statement* Property Tax* IFI
In some countries like the Philippines, couples in concubinage do not receive the same tax benefits as married couples. They are taxed individually, have no joint filing options, and lack spousal exemptions. However, they can benefit from jointly applying for housing loans and might be eligible for certain public benefits under specific circumstances.
- In the Philippines, contrary to married couples, those engaging in concubinage may not receive the same tax benefits, as they are taxed individually with no joint filing options and no spousal exemptions.
- However, in some cases, unmarried couples can still benefit from shared opportunities, such as jointly applying for housing loans.
- To ease the financial burden, concubine partners in the Philippines should keep updated records to maximize their personal-finance management, assessing opportunities for tax reductions or credits that each individual may be eligible for.
- It is crucial to understand updated tax laws affecting concubinage relationships, considering their independent legal and financial status, to better plan personal finances and manage potential alimony obligations if the relationship ends.
