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Practical Income Manual 2022.

a) General rule

The determination of the attributable income is carried out at the headquarters of the entity that obtains it, in accordance with the IRPF regulations applicable to each type of income according to its origin or source, without taking into account any reductions or minorities that may correspond to said income. However, the corresponding reductions or reductions may be applied by the members of the entity under the income attribution regime who are taxpayers of Personal Income Tax .

In short, the determination of the attributable income, depending on its origin or source, will be carried out at the headquarters of the entity that obtains it, in accordance with the criteria explained below:

1. Return on real estate property

The attributable net income will be determined by the difference between the full income and the expenses necessary to obtain the same, including the depreciation of the property and the other assets transferred with it, without applying:

  • The reduction of 60 percent on the positive net returns derived from the rental of properties intended for housing referred to in article 23.2 of the Personal Income Tax Law .

  • The reduction of 30 percent on returns with a generation period of more than two years, as well as on those classified by regulation as obtained in a notoriously irregular manner over time when, in both cases, are charged in a single tax period and the amount of net income to which the reduction is applied does not exceed 300,000 euros per year. Reduction contemplated in article 23.3 of the Personal Income Tax Law .

It will be the natural person members of the entity under the income attribution regime who are personal income tax taxpayers who will be able to make these reductions in their declaration.

2. Income from movable capital

The attributable net income will be determined by the difference between the total income and the deductible expenses referred to in article 26.1 of the Personal Income Tax Law .

In the case of capital gains that go to the savings tax base, the administration and deposit of negotiable securities are deductible expenses. In the case of income derived from the provision of technical assistance, the leasing of personal property, businesses or mines or from subleases, the expenses necessary to obtain it and, where applicable, the amount of the deterioration suffered by the company will be deducted from the full income. the assets or rights from which the income comes.

In no case may the attribution regime entity apply the 30 percent reduction contemplated in article 26.2 of the Personal Income Tax Law for the net returns provided for in article 25.4 of the aforementioned Law (income from movable capital to be integrated into the general tax base) that have a generation period of more than two years or are classified by regulation as obtained in a notoriously irregular manner over time when, in both cases, they are attributed in a single tax period and The amount of net income to which the reduction is applied does not exceed 300,000 euros per year.

It will be the members of the entity under the income attribution regime who are taxpayers for Personal Income Tax who will be able to apply this reduction in their declaration.

Depending on the nature of the return on the attributed movable capital, the taxpayer must include it in their declaration in the following way:

  1. In the general tax base the income provided for in article 25.4 of the Personal Income Tax Law under the name "other income from movable capital", as well as those derived from the transfer of own capital to third parties referred to in article 25.2 of the Personal Income Tax Law that come from entities linked to it.

  2. In the tax base of savings the income provided for in sections 1, 2, and 3 of article 25 of the Personal Income Tax Law (income obtained by participation in the own funds of any type of entity; returns obtained from the transfer of own capital to third parties; income from capitalization operations and life or disability insurance contracts and income derived from the taxation of capital). The comment on these returns to be integrated into the savings tax base is contained in Chapter 5 .

3. Earnings from economic activities

The determination of the attributable income will be carried out in accordance with the method of determining the net income that is applicable to the entity, without the reduction being applicable to the calculation of the income to be attributed to each of its members. of 30 per 100 on income with a generation period of more than two years or classified by regulation as obtained in a notoriously irregular manner over time, when, in both cases, they are attributed in a single tax period provided for in the article 32.1 of the Personal Income Tax Law .

The reductions for the exercise of economic activities of article 32.2. of the Personal Income Tax Law and for the start of a new activity of article 32.3 of the Personal Income Tax Law Personal Income Tax Law are not applicable by entities under the regime of attribution of income to determine the net return from their economic activities. The members of the entity under the income attribution regime who are taxpayers for Personal Income Tax will be the ones who will be able to make these reductions in their declaration, if applicable, for Personal Income Tax those who will be able to apply these reductions in their declaration.

The expenses of each of the community members, partners or participants who, because their payment has not been agreed upon by the entity under the income attribution regime, are satisfied by each of them will be deductible for them, provided that there is due correlation with obtaining income. The deductibility of these expenses will be made by the community member, partner or participant who has paid them, reducing the return attributed to him by the entity.

The requirements for the application to entities under the income attribution regime of the direct estimation method , both in the normal and simplified modality, and the objective estimation method in both agricultural, livestock and forestry activities as well as the remaining activities can be consulted, respectively, in Chapters 7, 9 and 8 of this manual.

4. Capital gains and losses

The determination of the attributable income will be carried out in accordance with the rules of Personal Income Tax .

Depending on whether or not the attributed capital gain or loss derives from the transfer of assets, the taxpayer must include it in their declaration as follows:

  1. In the tax base generates capital gains and losses that do not arise from transfers of assets.

  2. In the tax base of savings the capital gains and losses arising from the transmission of capital elements regardless of their generation period.

In cases of transmission of a common asset, the amount of the capital gain or loss will be calculated by the entity with respect to each partner, heir, community member or participant, taking into account their participation in the ownership of the asset or the real right over it. same, due to the difference between their acquisition and transfer values, applying, where appropriate, the ninth transitional provision of the Personal Income Tax Law only on the capital gains corresponding to those partners, heirs, community members or participants who had acquired prior to December 31, 1994, which requires communication by them of the information necessary to apply the new limit of 400,000 euros established by the aforementioned ninth transitional provision (limit that is individual).

The specialties relating to the application of the reducing coefficients to capital gains derived from transfers of unaffected assets acquired before December 31, 1994, are discussed in Chapter 11.

Important: for the calculation of income from capital gains derived from the transmission of elements not affected by the development of economic activities , which must be attributed to the members of these entities, who are taxpayers of Corporate Tax or taxpayers of the Income Tax of non-residents with permanent establishment or without permanent establishment who are not natural persons, the reducing coefficients or of abatement referred to in the ninth transitional provision of the Personal Income Tax Law .

5. Real estate income allocation

The determination of the attributable income will be carried out in accordance with the rules of Personal Income Tax that are applicable to each concept included in this category of income. These rules have been discussed previously in this Chapter in the section corresponding to " Regime for imputation of real estate income ".

6. Withholdings and payment on account

The withholdings and payments on account borne by the entity under the income attribution regime and the bases of the corresponding deductions to the entity will be attributed to their members in the same proportion in which the income is attributed.