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Practical Income Manual 2021.

Phase 2. Determination of reduced net yield

To determine reduced net yield, the following reduction will be applied to the net yield calculated in accordance with what is indicated in Phase 1 above:

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

This reduction may be applied to the calculated net performance when appropriate, the most notable aspects of which are the following:

1. Yields to which it is applied and reduction percentage

The following yields will be reduced by 30 percent :

  1. Net income whose generation period is greater than two years, provided that they are attributed to a single tax period.

  2. Net returns obtained in a notoriously irregular manner over time.

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

    1. Capital subsidies for the acquisition of non-depreciable fixed assets.

    2. Compensation and aid for cessation of economic activities.

    3. Literary, artistic or scientific awards that do not enjoy exemption from this tax. For these purposes, economic considerations derived from the transfer of intellectual or industrial property rights or that replace them are not considered prizes.

    4. Compensation received in replacement of economic rights of indefinite duration.

2. Maximum amount of performance to which the reduction applies

The amount of net income to which the 30 percent reduction will be applied may not exceed the amount of 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 the maximum amount on which to apply the 30% reduction, the maximum reduction will be distributed proportionally among all the returns of that nature.

Important: This reduction will not apply to those income that, even though they may 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 income. .

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

Regulations: Transitional provision twenty-fifth.3 Personal Income Tax Law

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

However, in the case of income derived from commitments acquired prior to January 1, 2015 that were scheduled to begin to be received in installments in tax periods beginning on that date , the replacement of the initially agreed form of collection with its collection in a single tax period will not alter the beginning of the yield generation period.