Individualization of the returns from economic activities

Regulations: Art. 11.4 Law Income Tax

According to article 11.4 of the Personal Income Tax Law , the income from economic activities is considered to be obtained by those who regularly, personally and directly carry out said activities, and for these purposes it is presumed, unless proven otherwise, that said requirements are met by those who appear as the owners of said activities.

In the case of family units in which one of its members carries out economic activities, the regulations of the IRPF delimit the fiscal treatment of the relationships that may exist between members of the same family unit in relation to the following issues:

A. Work benefits between members of the same family unit

Regulations: Art. 30.2 2 Personal Income Tax Law

Remuneration for the work of the spouse or minor children in the economic activity carried out by the taxpayer is considered as income from dependent work for the recipient and as a deductible expense for the payer, provided that the following requirements are met:

• Sufficient proof that the spouse or unemancipated minor child of the owner of the economic activity works regularly and continuously in the same.

• Cohabitation of the spouse or minor child with the owner of the activity.

• Existence of employment contract.

• Affiliation of the spouse or minor child to the corresponding Social Security regime.

• Existence of remuneration stipulated for the work carried out, which cannot be higher (although they may be lower) than the market remuneration corresponding to the professional qualifications and work carried out by the spouse or minor children. If they are higher, the excess over the market value will not be a deductible expense for the payer.

B. Transfers of assets or rights between members of the same family unit

Regulations: Art. 30.2 3 Personal Income Tax Law

When the taxpayer's spouse or minor children who live with him/her make transfers of assets or rights that serve the purpose of the economic activity in question, the owner of said activity may deduct to determine the income from said activity, the consideration stipulated for said transfer, provided that it does not exceed the market value and, in the absence of the former, the latter may be deducted.

Correlatively, the stipulated consideration or the market value will be considered as capital income of the spouse or minor children for all tax purposes.

Important : The use of assets common to both spouses by the spouse who carries out an economic activity is not considered a transfer for tax purposes and does not generate any remuneration between them.

C. Particularities in the activities covered by the objective estimation method

When the owner of the economic activity determines the net income of his activity using the objective estimation method, the remuneration stipulated with his spouse or minor children for the work they perform in the service of the activity is not deductible in any case, since in the aforementioned method the net income is determined based on objective signs, indices or modules that already foresee this circumstance.

However, if the spouse or minor children are considered salaried personnel for the purposes of the aforementioned method, the stipulated remuneration has the character of work income subject to tax.

Similarly, the consideration (or the market value, failing that) corresponding to the transfer of assets or rights that the spouse or minor children make for use in the activity are not deductible. For their part, the compensation received by the spouse or minor children is considered capital gains and must be declared as such.