Phase 2. Determination of reduced net yield

To determine reduced net income, the following reduction will be applied to the net income calculated in accordance with the provisions of the previous Phase:

Reduction for returns with a generation period of more than two years or obtained in a notoriously irregular manner

Regulations: Articles 32.1 Personal Income Tax Law and 25 Regulations

The net yield determined in accordance with the previous phase may be reduced, where appropriate, for yields with a generation period of more than two years or obtained in a notoriously irregular manner, the most notable aspects of which are the following:

• Yields to which it applies

  The following returns will be reduced by 30% :

  1. Net income whose generation period is greater than two years, provided that it is attributed to a single tax period.
  2. Net returns obtained in a notoriously irregular manner over time.

  The following are considered to be income from economic activities obtained in a notoriously irregular manner over time, exclusively, when they are imputed in a single tax period :

  1. Capital grants for the acquisition of non-depreciable fixed assets.
  2. Compensation and aid for cessation of economic activities.
  3. Literary, artistic or scientific prizes that do not benefit from exemption from this tax. For these purposes, economic compensation derived from the transfer of intellectual or industrial property rights or that replace these are not considered prizes.
  4. Compensation received in lieu of economic rights of indefinite duration.

• Maximum amount of performance to which the reduction applies

  The amount of net income to which the 30% reduction will be applied may not exceed 300,000 euros per year.

  In the event that several irregular returns of the same nature are obtained, and their amount exceeds the limit of 300,000 euros of maximum amount on which to apply the 30% reduction, the maximum reduction will be distributed proportionally between all the returns of that nature.

  Important: This reduction will not apply to those returns that, even though they could individually derive from actions carried out over a period that meets the requirements indicated above, come from the exercise of an economic activity that regularly or habitually obtains this type of returns.

• Income received in installments before January 1, 2015: Transitional scheme

  Regulations: Twenty-fifth transitional provision.3 Personal Income Tax Law

  The income that was received in installments prior to January 1, 2015, with the right to apply the reduction in article 32.1 of the Personal Income Tax Law as worded as of December 31, 2014, may apply the current reduction of 30 percent with a maximum reduction base limit of 300,000 euros, to each of the installments that are imputed as of January 1, 2015 , provided that the quotient resulting from dividing the number of years of generation, computed from date to date, by the number of tax periods of installment payment, is greater than two.

  However, when it concerns income derived from commitments acquired prior to January 1, 2015, which were scheduled to begin being collected in installments in tax periods beginning on or after said date , the substitution of the initially agreed form of collection for its collection in a single tax period will not alter the start of the period for generating the income.