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Practical Income Manual 2020.

Performance of economic activities

A. General issues: Criteria for temporal imputation of the components of the net income of economic activities

From January 1, 2020, public aid for the first installation of young farmers provided for in the National Rural Development Framework of Spain may be allocated in quarters, in the tax period in which it is obtained and in the following three.

B. Economic activities in direct estimation

Tax deductible expenses

Losses due to impairment of credits derived from possible insolvencies of debtors of article 13.1 of the LIS.

In accordance with article 14 of Royal Decree-Law 35/2020, of December 22, on urgent measures to support the tourism, hospitality and commerce sector and in tax matters, personal income tax taxpayers who are considered a reduced size due to meeting the conditions of article 101 of the LIS, they may deduct, in the years 2020 and 2021, losses due to deterioration of credits derived from possible insolvencies of debtors when at the time of accrual of the tax the period that has elapsed from the expiration of the obligation referred to in article 13.1.a) of the ICEX LIS is three months.

C. Economic activities in objective estimation

As a consequence of the health crisis caused by Covid-19 and with the aim that the amount of net return determined in accordance with the objective estimation method adjusts to the reality of the economic activity caused by this situation, measures have been adopted for this fiscal year 2020 the following measures:

1. Resignation and consequences of resignation

Following the declaration of the state of alarm due to Covid-19, article 10 of Royal Decree-Law 15/2020, of April 21, on complementary urgent measures to support the economy and employment ( BOE of 22), eliminated the mandatory binding that is legally established for three years for the renunciation of the objective estimation method of personal income tax. Specifically, the renunciation of the application of the objective estimation method for the 2020 financial year does not prevent the return of the performance of the economic activity in 2021 from being determined in accordance with said method, provided that the requirements for its application are met, when the taxpayer revokes the previous resignation.

To this end, taxpayers were given the opportunity to waive the application of the objective estimation method for the 2020 financial year by submitting the payment in installments in accordance with the direct estimation method (therefore presenting form 130 instead of 131). In that case, they are taxed in 2020 using the direct estimation method.

For the year 2021, the exceptional revocation of the waiver to return to tax under the objective estimation regime may be carried out during the month of December 2020 or by submitting on time the declaration corresponding to the installment payment of the first quarter of the year. 2021 in the manner provided for the objective estimation method.

Also provided for in article 10.1 of Royal Decree-Law 15/2020, of April 21, on complementary urgent measures to support the economy and employment (BOE of 22), is the waiver of the application of the objective estimation method for the year in 2021 which is also not binding for 2022.

2. Exclusive limits :

  • Royal Decree-Law 18/2019, of December 27, which adopts certain measures in tax, cadastral and social security matters (BOE of the 29th), modified the thirty-second transitional provision of the Personal Income Tax Law, extending for the 2020 tax period the application of the same exclusive quantitative limits of the objective estimation method set for the years 2016, 2017, 2018 and 2019: both those relating to the volume of full income in the immediately preceding year derived from the exercise of economic activities (250,000 euros for all economic activities, except agricultural, livestock and forestry activities and 125,000 euros for operations in which there is an obligation to issue an invoice when the recipient is a businessman) and the volume of purchases of goods and services (250,000 euros, excluding acquisitions of fixed assets)
  • For agricultural, livestock and forestry activities, the exclusionary limit provided for in article 31 of the Personal Income Tax Law applies to the volume of full income in the immediately preceding year (250,000 euros per year, for the all of its agricultural, livestock and forestry activities carried out by the taxpayer) and, for the volume of purchases of goods and services, the amount of 250,000 euros, excluding acquisitions of fixed assets, provided for in the thirty-second transitional provision in the Personal Income Tax Law and whose application is extended to fiscal year 2020.

3. Determination of prior net performance :

Order HAC /1164/2019, of November 22 ( BOE of 30), maintains for the 2020 financial year the amount of the signs, indices or modules from the previous exercise.

Now, for the application of the signs, indices or modules of the objective estimation method of personal income tax, for the purposes of calculating the annual return, article 11 of Royal Decree-Law 35/2020, of December 22, on urgent measures of support for the tourism, hospitality and commerce sector and in tax matters, has taken into account the impact of the states of alarm decreed in 2020, establishing that they will not be counted as the period in which the activity was carried out, both the days on which the state of alarm was declared in the first half of 2020, as well as the days of the second half of 2020 on which, whether or not the state of alarm was declared, the effective exercise of economic activity would have been suspended as a result of the measures adopted by the competent authority to correct the evolution of the epidemiological situation derived from Covid-19 (also called SARS-CoV-2).

In particular, for the quantification of the modules "salaried personnel" and "non-salaried personnel, those corresponding to the days referred to in the previous paragraph will not be counted as hours worked and for the quantification of the modules "distance traveled" and " consumption of electrical energy» the kilometers traveled nor the kilowatts/hour that proportionally correspond to the days referred to in the first paragraph will not be computed.

4. Determination of the net performance of the activity: applicable reductions

  • General reductions: Article 10 of Royal Decree-Law 35/2020, of December 22, on urgent measures to support the tourism, hospitality and commerce sector and in tax matters, increases the percentage of reduction to be applied, in general, to the performance net of modules in the personal income tax return corresponding to the 2020 financial year, from 5 percent to 20 percent. Percentage that increases to 35 percent for activities linked to the tourism, hospitality and commerce sectors.

  • The 20 percent reduction in net income for economic activities carried out in the municipal area of Lorca (Murcia) is maintained.

Accounting and Registration Obligations

On January 1, 2020, Order HAC /773/2019, of June 28, came into force, which regulates the keeping of record books in the Income Tax of Natural Persons that replaces and repeals the previous Order of May 4, 1993.