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Form 100. 2020 Personal Income Tax Return Declaration

Tax-deductible provisions

Normal Mode

The following expenses, among others, will not be deductible for the concept of provisions (art. 14 of the LIS)

  • Expenses for provisions and internal funds to cover contingencies identical or analogous to those that are the subject of the consolidated text of the Law on the Regulation of Pension Plans and Funds. These expenses will be tax deductible in the tax period in which the benefits are paid.
  • Expenses related to long-term compensation to personnel through defined contribution or defined benefit systems. However, the contributions of the promoters of pension plans regulated in the consolidated text of the Law on the Regulation of Pension Plans and Funds will be deductible, as well as those made to corporate social security plans. Contributions to cover contingencies similar to those of pension plans will also be deductible.
  • Expenses derived from implicit or tacit obligations
  • Those concerning the costs of compliance with contracts that exceed the economic benefits expected to be received from them.
  • Those derived from restructuring, except if they refer to legal or contractual obligations and not merely tacit ones.
  • Those related to the risk of sales returns.
  • Personnel payments that correspond to payments based on equity instruments, used as a remuneration formula for employees, and are paid in cash.

Among others, they will be deductible (art.14 LIS)

  • Expenses corresponding to environmental actions when they correspond to a plan formulated by the taxpayer and accepted by the Tax Administration.
  • The expenses inherent in the risks derived from guarantees for repairs and revision will be deductible up to the amount necessary to establish a provision not greater than the result of applying to sales with guarantees in force at the conclusion of the tax period a percentage determined by the cost of covering such guarantees in the tax period concerned and in the two previous periods as a proportion of sales backed by guarantees in these tax periods. This same rule will apply to provisions to cover accessory expenses for sales returns.
  • Newly created entities may also deduct the provisions mentioned above for risks derived from repair and revision guarantees, by setting the percentage referred to therein, with respect to the expenses and sales made in the tax periods that have elapsed.

Simplified Mode

All deductible provisions and expenses that are difficult to justify will be quantified exclusively by applying the percentage of 5% of the positive net income, excluding this concept, without the resulting amount exceeding 2,000 euros per year. The 5% percentage is applied activity by activity, but the maximum amount that the taxpayer can deduct in all their activities for this concept cannot exceed 2,000 euros.

In the case of activities carried out through entities under the income attribution regime, the deduction for deductible provisions and expenses that are difficult to justify will be applied individually by each taxpayer or partner, heir, community member or participant on the net income of the economic activity that corresponds to you based on your percentage of participation in the entity, applying the limit of 2,000 euros to said amount.

The 5% percentage for deductible provisions and expenses that are difficult to justify is incompatible with the application of the reduction provided for holders of economic activities carried out for a single client.