Individualization of the returns from economic activities

Regulations: Art. 11.4 Law Personal Income Tax

In accordance with article 11.4 of the Personal Income Tax Law , the income from economic activities is considered obtained by those who habitually, personally and directly carry out said activities, and is presumed for these purposes, unless proven On the contrary, said requirements apply to those who appear as holders of the same.

In the case of family units in which some of its members carry out economic activities, the IRPF regulations delimit the tax treatment of the relationships that may occur between the members of the same family unit in related to the following issues:

A. Work benefits between members of the same family unit

Regulations: Art. 30.2 2 Law Personal Income Tax

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

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

• Coexistence 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 stipulated remuneration for the work carried out, which cannot be higher (although lower) than the market corresponding to the professional qualification and work performed 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 Law Personal Income Tax

When the spouse or minor children of the taxpayer who live with him make transfers of assets or rights that serve the purpose of the economic activity in question, the owner of said activity may deduct , for the determination of the returns thereof, 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 a return on the capital 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 nor does it 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 return 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 in no case deductible, since In the aforementioned method, the net return is determined based on signs, indices or objective 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 for them has the character of income from work subject to Personal Income Tax .

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