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Practical Income Manual 2022.

Current and capital subsidies: distinction

Public aid gives rise to different tax treatment depending on the classification that should be given to it: Current and capital subsidies.

Capital grants

Capital subsidies are those whose primary purpose is to promote the installation or start of the activity, as well as the making of investments in fixed assets (buildings, machinery, facilities, etc.), or multi-year projection expenses and are charged as income to the same extent that the investments or the expenses incurred on them are amortized.

Therefore, the subsidy will have the character of a capital subsidy as long as its purpose is to finance the fixed assets or fixed capital of the businessman or professional. However, if its purpose is to guarantee, during the start of the activity, a minimum income or to offset expenses for the year, it must be treated as a current subsidy.

Capital subsidies will be allocated as income for the year in proportion to the amount for amortization carried out in that period for the aforementioned elements or, where appropriate, when their disposal occurs, valuation correction due to impairment or derecognition of the balance sheet, although the taxpayer has previously opted for the criterion of temporary allocation of collections and payments or cash criterion, given its specialty and the reference that the Personal Income Tax Law makes to the specific regulations of Corporate Tax and this, in turn, to the accounting result. Supreme Court rulings no. 392/2022, of March 29, and 398/2022, of March 30, respectively, in appeals no. 3679/2020 (RED: STS 1456/2022) and 8193/2020 (RED: STS 1285/2022).

However, in those cases in which the assets are not susceptible to amortization, the subsidy will be applied as full income for the year in which the asset financed with said subsidy is sold or removed from inventory, applying the 30% reduction. typical of the returns obtained in a notoriously irregular manner over time .

Current subsidies

Current subsidies are those that are normally granted to guarantee a minimum profitability or compensate for losses caused in the activity and are computed in their entirety as additional income for the period in which they accrue. That is, when the grant of the subsidy is firmly recognized and quantified, regardless of the moment in which it is received.

Notwithstanding the foregoing, if the taxpayer had opted for the collections and payments criterion, in the terms provided for in article 7.2 of the Personal Income Tax Regulation , which establishes the option of using the collections and payments to temporarily allocate the income and expenses derived from income from economic activities, the subsidy must be allocated in the tax period in which the corresponding collection of the same occurs.

Note: Please note that the following aid granted during 2022 is taxed as current subsidies, with the aim of compensating for the increase in costs caused as a result of the invasion of Ukraine and the sanctions imposed on Russia for its cause:

  • Direct aid to the road transport sector provided for in articles 25 of Royal Decree-Law 6/2022, of March 29 ( BOE of March 30) and 4 of the Royal Decree-Law 14/2022, of August 1 ( BOE of August 2).

  • Direct aid to the intensive gas industry sector provided for in article 20 of Royal Decree-Law 11/2022, of June 25 ( BOE June 26).

  • Direct aid to the agricultural sector provided for in article 33 of Royal Decree-Law 6/2022, of March 29 ( BOE of March 30) and developed in Royal Decree 428/2022, of June 7 ( BOE June 8).