Current and capital subsidies: distinction

The different forms that public aid can take and its different applications give rise to different tax treatment depending on the classification that must be granted to them: Current and capital grants.

Capital grants

Capital grants are those whose primary purpose is to promote the installation or start-up of the activity, as well as the realization of investments in fixed assets (buildings, machinery, installations, etc.), or multi-year projection expenses and are charged as income to the same extent as the investments or expenses incurred against them are amortized.

However, in those cases where the assets are not susceptible to amortization, the subsidy will be applied as full income for the year in which the sale or write-off in inventory of the asset financed with said subsidy occurs, applying the 30% reduction typical of returns obtained in a notoriously irregular manner over time .

Current grants

Current subsidies , are those that are normally granted to guarantee a minimum profitability or compensate for losses caused in the activity, they are computed in their entirety as additional income for the period in which they are accrued. That is, when the granting of the subsidy is definitively recognised and quantified.

Notwithstanding the foregoing, if the taxpayer had opted for the criteria of collections and payments, in the terms provided in article 7.2 of the Regulations of the PIT, which establishes the option of using the collection and payment criterion to temporarily allocate income and expenses derived from income from economic activities, the subsidy must be allocated in the tax period in which the corresponding collection occurs.