Practical case (determination of net income derived from professional activity in direct estimation, simplified modality)

Don HAV, married to Mrs. ESM under a community regime, he is a radiologist and carries out his professional activity exclusively in a private practice located in premises acquired by the couple.

To determine its net income, it uses the direct (simplified) estimation method and the accrual criterion to allocate the income and expenses of its activity.

The workforce in fiscal year 2020 is one employee. According to the data contained in its record books, the income and expenses corresponding to 2020 are as follows:

Full income

Fees for provision of services: 124,000
Conferences and publications: 10,800

Bills

Wages and salaries: 18,900
Social Security: 5,900
Special Social Security regime for self-employed or self-employed workers of the owner of the activity (RETA): 3,300
Purchases radiological and health material: 19,000
Financial expenses: 1,100
Depreciation of the premises: 2,900
Amortization of radiological equipment: 5,000
VAT supported on current expenses: 1,600
Non-state taxes: 1,700
Attendance VI Radiological Congress: 1,000
Acquisition of books and medical journals: 1,300
Electrical supply: 4,000
Water supply: 300
Gas supply: 1,000
Telephone and Internet supply: 2,500
Cleaning of the premises: 4,500
Reparations and conservation: 3,800
Community receipt (local consultation): 1,700

Likewise, under the concept of “extraordinary income and expenses”, the following items appear:

Extraordinary income (consequence of the sale of the premises intended for consultation): 80,900
Extraordinary expense (consequence of the sale of X-ray equipment): 7,200

Other data of interest

Within the amounts recorded in the "Fees for provision of services" heading, no amount is included for 10 x-rays performed on your son in March 2020. The average market price for each similar x-ray is 60 euros.
"Conferences and publications" involve the taxpayer's own organization of means of production with the purpose of intervening in the production and distribution of services, with the transfer of copyrights existing with regard to publications.
In "Salaries and salaries" there are 1,200 euros given to his wife for the services provided as an assistant in the clinic during the month of vacation of the employee who has provided her services at the clinic since 2002.
The amortizations carried out correspond to the effective depreciation of the elements of property, plant and equipment.
The initial stocks of inventoriable products amounted to 13,100 euros, and the final stocks amounted to 16,100 euros.
"Extraordinary income and expenses" respond, respectively, to the profit obtained from the sale of the premises in which the consultation was installed and the loss derived from the sale of an X-ray machine.
The remaining income not exempt from personal income tax obtained by the taxpayer in 2020 amounted to 1,500 euros.

Solution:

Information	Subject	Registered values	Tax values
Revenues	Fee	124,000	124,000
	Self-consumption	--	600 ⁽¹⁾
	Conferences	10,800	10,800 ⁽²⁾
	Variation of existences	3,000	3,000 ⁽³⁾
	Total income	137,800	138,400
Bills	Wages and salaries	18,900	17,700 ⁽⁴⁾
	Social Security	5,900	5,900
	Special System for Self-Employed Workers	3,300	3,300
	Shopping	19,000	19,000 ⁽⁵⁾
	Acquisition of books and magazines	1,300	1,300
	Financial expenses	1,100	1,100
	Provisions for the year for amortization of property, plant and equipment (premises and radiological equipment)	7,900	7,900 ⁽⁶⁾
	Input VAT	1,600	1,600 ⁽⁷⁾
	Non-state taxes	1,700	1,700
	Supply (electricity, water, gas, telephone and internet	7,800	7,800
	Conservation repair	3,800	3,800
	Cleaning of the premises (other exterior services)	4,500	4,500
	Community/consultation receipts (other external services)	1,700	1,700
	Assistance VI Congress (Other tax deductible concepts)	1,000	1,000
	Total spends	79,500	78,300 ⁽⁸⁾
	Set of deductible provisions and expenses that are difficult to justify	--	2,000 ⁽⁹⁾
Net performance		58,300	58,100
Reduced net yield			58,100 ⁽¹⁰⁾
Total reduced net yield			58,100 ^(eleven)

Notes to the table:

⁽¹⁾The income must include 600 euros, for self-consumption, when valuing the 10 x-rays performed on your son at market price. ^(Back)

⁽²⁾The amounts received for "Conferences and publications" are considered income from the professional activity carried out by the taxpayer. ^(Back)

⁽³⁾The variation between the initial inventories (13,100) and the final ones (16,100) determines an increase of 3,000 euros at the end of the year compared to the beginning, that is, a positive variation that must appear as full income within the heading “Variation in inventories ( increase in final stocks)". ^(Back)

⁽⁴⁾Of the amount recorded in "salaries and salaries", 1,200 euros given to his wife for the provision of work in the consultation during the month of July do not have this character, as the legally required requirements for this are not met. These requirements refer especially to the regularity and continuity in the provision of work, as well as the existence of an employment contract and affiliation to the corresponding Social Security regime. ^(Back)

⁽⁵⁾Purchases appear for their total amount as a deductible expense. However, to determine the radiological and health material consumed in the year, this heading is completed with the “Valuation of stocks” (which will appear as income when the value of the final stocks is greater than the value of the initial ones and as an expense when the opposite occurs, that is, the valuation of the final stocks is lower than that of the initial ones).

In this case, the variation in stock has been included as it is positive as income (+3,000) and material purchases as expenses (-19,000), which determines the material consumed (16,000) by difference.

For these purposes, it must be taken into account that to determine the radiological and health material consumed in the year, the following operation must be carried out: 13,100 (initial stock) + 19,000 (purchases made) – 16,100 (final stocks) = 16,000 euros (purchases consumed).

In this case, the variation in stock has been included as it is positive as income (+3,000) and material purchases as expenses (-19,000), which determines by difference the material consumed (-16,000). ^(Back)

⁽⁶⁾The amortizations carried out correspond to the effective depreciation of the fixed assets, so their amount constitutes a tax-deductible expense. ^(Back)

⁽⁷⁾The input VAT is deducted as an expense because it is an activity exempt from this tax, which does not give the right to deduct the input taxes. ^(Back)

⁽⁸⁾Despite both the consultation premises and the The quantification and taxation of capital gains derived from the transfer of affected assets is discussed in Chapter 11 "Equity gains and losses" of this Manual. ^(Back)

⁽⁹⁾Being in the simplified direct estimation modality, you can deduct 5 percent of the positive net return in general for deductible provisions and expenses that are difficult to justify (the positive difference between full income and other tax-deductible expenses), with the limit of 2,000 euros per year. In this case, you may deduct 2,000 euros when this amount exceeds 5% of your net income: 5%(135,400 – 72,000) = 3,170 euros. ^(Back)

⁽¹⁰⁾As there are no returns with a generation period of more than two years or that are considered to have been obtained in a notoriously irregular manner over time, the reduced net return from the activity coincides with the net return which amounts to 61,400 euros. ^(Back)

^(eleven)The total reduced net income coincides with the reduced net income that amounts to 61,400 euros since it does not meet the requirements for the application of the reduction for the exercise of certain economic activities of article 32.2.1 of the Income Tax Law which, if applicable, would have been incompatible with the 5% deduction (with a maximum amount of 2,000 euros) for all deductible provisions and expenses that are difficult to justify referred to in article 30.2. 4 of the Personal Income Tax Law). It also does not meet the requirements to apply the reductions of article 32.2.3 and 32.3 of the Personal Income Tax Law . ^(Back)