Distinction between income from business and professional activities and between commercial and non-commercial business activities
A. Distinction between income from business and professional activities
The regulations governing Personal Income Tax establish the following differentiation rules:
1. General rules
Income from professional activities is income derived from the exercise of the activities included in Sections Second (general professional activities) and Third (professional activities of an artistic or sporting nature) of the Rates of the Tax on Economic Activities ( IAE ), approved by Royal Legislative Decree 1175/1990, of September 28 ( BOE of 29); while s on income from business activities those that come from activities included as such in the First Section of the aforementioned Rates [Art. 95.2 a) Personal Income Tax Regulation].
In relation to the professional activities carried out by entities under the income attribution regime, it must be clarified that, despite the fact that said entities must pay taxes on the First Section of the Rates of the IAE for the exercise of such activities, these maintain for the purposes of Personal Income Tax their character as professional and non-business activities, in accordance with the provisions of section 3 of rule 3 of the Instruction for the application of Royal Legislative Decree 1175 /1990, of September 28, which approves the rates and instructions for the Tax on Economic Activities.
In accordance with this criterion, income from professional activities is income obtained through the free exercise of one's profession , provided that said exercise involves the self-management of means of production and human resources. or one of both, among others, by: veterinarians, architects, doctors, lawyers, notaries, registrars, insurance actuaries, insurance agents and brokers, singers, music teachers and directors, official distributors of lotteries, sports betting and other games included in the network of the public business entity Lotteries and State Bets.
amounts received by people who, on the salary of a company for the functions they perform in it, are obliged to register in their respective professional associations and are not considered income from professional activities ##1## , in general, those derived from an employment or dependent relationship. These amounts are included among the income from work, in which section they must be declared (Art. 95.3 Personal Income Tax Regulation).
Business income is derived from, among others, the following activities : extractives, mining, manufacturing, clothing, construction, wholesale trade, retail trade, food services, transport, hospitality, telecommunications, etc.
2. Particular rules
The difficulties that may arise when correctly classifying certain specific assumptions of income have led to the personal income tax regulations specifically contemplating and regulating the following particular cases:
2.1 Authors or translators of works
Regulations: Articles 17.2 d) Law Personal Income Tax and 95.2 b) 1 Regulation Personal Income Tax
Income derived from the production of literary, artistic or scientific works, provided that the right to their exploitation is transferred, constitutes income from work , except when said activity involves the self-management of the means of production and human resources, or one of both, with the purpose of intervening in the production of goods or services, in which case the returns are classified as derived from economic activities . Assuming that this happens, the returns are
business when the authors or translators themselves directly edit their works, and
professionals if the authors or translators transfer their exploitation to a third party.
Finally, when the beneficiary or recipient of copyright is a third party other than the author or translator (for example, heirs), they constitute for the recipient income from movable capital .
2.2. Commission agents
Regulations: Art. 95.2 b) 2 Regulation Personal Income Tax
Professional returns are those obtained by commission agents when their activity is limited to approaching or approaching interested parties for the execution of a contract.
On the contrary, when, in addition to the function described above, they assume the risk and fortune of the commercial operations in which they participate, the performance must be classified as business .
income from work constitutes income derived from the special employment relationship with the company that the commission agents or commercial agents represent and that do not involve the management of means of production and/or resources on their own account. humans.
Regulations: Art. 95.2 b) 3 Regulation Personal Income Tax
They are considered income derived from professional activities those obtained by these people, whatever the nature of the teachings they teach, as long as they exercise this activity, either at home, in private homes or in an academy or open establishment, without an employment or statutory relationship.
If the relationship from which the remuneration comes is employment or statutory, the income will be included among those derived from the work .
For its part, teaching in academies or own establishments will be considered business activity .
2.4. Conferences, colloquia, seminars and similar
Regulations: Articles 17.2 c) and 17.3 Law Personal Income Tax
Income derived from teaching courses, conferences, colloquiums, seminars and similar are considered income from work , even when said activities are provided outside of an employment or statutory relationship.
However, when such activities involve the self-management of means of production and human resources or one of both, with the purpose of intervening in the production or distribution of goods or services (for example, when the taxpayer was already exercising economic activities and their participation in conferences, colloquiums or courses corresponds to matters directly related to the object of the activity, so that it can be understood that it is another service of their activity, or in cases in which they intervene as organizer of the courses or participate in the prosperous or adverse results derived from them), the income obtained will be classified as income derived from the exercise of professional activities.
B. Distinction between income from commercial and non-commercial business activities
According to commercial regulations, agricultural, livestock and craft activities are not considered commercial business activities, provided that in the latter case the sales of objects built or manufactured by artisans are carried out by them in their workshops. . The rest of the business activities are considered commercial.