3.4.2 Calculation of net income
In general, the net return is calculated as the difference between computable income and deductible expenses, applying, with nuances, the Corporation Tax regulations (incentives and stimuli are applied to the investment of the Corporation Tax).
Computable income is that derived from sales, the provision of services, self-consumption and subsidies, among others.
Deductible expenses are those which, duly justified and recorded in the accounts or in the compulsory books and records, are incurred in the course of the activity and are necessary to obtain income:supplies, consumption of stocks, staff costs, repair and maintenance, leasing and depreciation for the effective depreciation of operating assets.
As from 1 January 2018, the taxpayer's own living expenses incurred in the development of economic activity are considered deductible expenses for the determination of net income, provided that they are incurred in catering and hotel establishments and are paid using any electronic means of payment, with the quantitative limits established for the allowances and allocations for normal living expenses of workers.The excess over these amounts shall not be deductible.
Likewise, from 1 January 2018, when the taxpayer partially affects their principal residence to the development of the economic activity, the expenses of supplies of said residence, such as water, gas, electricity, telephone and Internet, will be deductible in the percentage resulting from applying 30% to the existing proportion between the square metres of the dwelling used for the activity with respect to its total surface area, unless a higher or lower percentage is proven.
The net income calculated shall be reduced by 30% on the following net income - the maximum amount on which this reduction applies is €300,000/year - if it is taxed in a single tax period:
Those with a generation period of more than two years.
The ones obtained of notoriously irregular form in the time, among others, by:
Capital subsidies for the acquisition of non-depreciable fixed assets (solar or land).
Indemnizaciones y ayudas por cese de actividades económicas.
Literary, artistic or scientific prizes that are not exempt from this tax.
Indemnities received in substitution of economic rights of indefinite duration.
In addition, for taxpayers who meet certain requirements (economically dependent self-employed workers or those with a single unrelated client), a reduction of €2,000 is established in the net income from economic activities under the direct assessment method - normal and simplified - in the amount of €2,000. In addition, an increase in this reduction is established provided that certain requirements are met:
€3,700 per year for self-employed persons with a net income equal to or less than €11,250 provided that they have no other income (excluding exempt) greater than €6,500 and for those whose net income is between €11,250 and €14,450 the reduction will be €3,700 minus the result of multiplying by 1.15625 the difference between the income and €11,250 per year.
€3,500 per year for people with disabilities who obtain net income derived from the effective exercise of these economic activities, increasing to €7,750 per year if they can prove that they need help from third parties or reduced mobility, or a degree of disability equal to or greater than 65%.
If the requirements for the above reduction are not met, taxpayers with non-exempt income of less than €12,000, including economic activity, may reduce the net return on economic activities by the following amounts:
€1,620 per year, with net yields equal to or less than €8,000 per year.If the yields are between €8,000.01 and €12,000 per year:€1,620 minus the result of multiplying the difference between these incomes and €8,000 per year by 0.405.
This reduction has two limits:
If you also receive income from work, this reduction together with a reduction for income from work may not exceed €3,700.
The amount of the net return cannot be negative as a result of the application of this reduction.
Taxpayers starting an economic activity may reduce by 20% the declared positive net return under the direct estimation method in its two forms, reduced where appropriate by any of the above reductions, in the first tax period in which the net return is positive and in the following tax period, provided that the amount of the net returns on which the said reduction is applied does not exceed €100,000/year.
When, subsequent to the commencement of the activity, a new activity is commenced without having ceased in the financial year of the first activity, the reduction is applied to the net income obtained in the first tax period in which it is positive and in the following tax period, starting from the commencement of the first activity.
The reduction may not be applied in tax periods in which more than 50% of that year's income are received from a person or organisation from which the taxpayer has obtained work income in the year prior to the start date of the activity.