Practical case (determination of net income derived from professional activity in direct estimation, simplified modality)

Don HAV, married to Mrs. ESM under a community property regime, he is a radiologist and practices his professional activity exclusively in a private practice located in premises acquired by the couple.

To determine its net income, it has been using the direct estimation method (simplified) and the accrual criterion for the allocation of income and expenses from its activity.

The workforce for the 2023 financial year is one employee. According to the data in its records, the income and expenses for 2023 are as follows:

Gross income

Fees for services rendered: 124,000
Conferences and publications: 10.800

Bills

Wages and salaries: 18.900
Social Security: 5.900
Special Social Security regime for self-employed workers or freelancers of the owner of the activity (RETA): 3.300
Purchase of radiological and medical equipment: 19,000
Financial expenses: 1,100
Amortization of the premises: 2.900
Amortization of radiological equipment: 5,000
VAT supported on current expenses: 1,600
Non-state taxes: 1,700
Attendance at the VI Radiological Congress: 1,000
Acquisition of medical books and journals: 1,300
Power supply: 4.000
Water supply: 300
Gas supply: 1,000
Telephone and Internet supply: 2,500
Cleaning of the premises: 4.500
Reparations and conservation: 3.800
Community receipt (consultation premises): 1,700

Also, under the concept of “extraordinary income and expenses”, the following items appear:

Extraordinary income (consequence of the sale of the premises used for consultation): 80.900
Extraordinary expense (consequence of the sale of X-ray equipment): 7.200

Other data of interest

The amounts recorded under the heading "Fees for services rendered" do not include any amount for 10 x-rays performed on his son in March 2023. The average market price for each similar X-ray is 60 euros.
"Conferences and publications" involve the taxpayer's own use of production means for the purpose of participating in the production and distribution of services, with the transfer of copyright in respect of publications.
Under "Salaries and wages" there are 1,200 euros paid to her spouse for services rendered as an assistant at the clinic during the month of vacation of the employee who has been providing her services at the clinic since 2002.
The amortizations carried out correspond to the effective depreciation of the elements of tangible fixed assets.
The initial stock of inventoried products amounted to 13,100 euros, while the final stock amounted to 16,100 euros.
"Extraordinary income and expenses" correspond, respectively, to the profit obtained from the sale of the premises in which the consultation was installed and to the loss derived from the sale of an X-ray machine.
The remaining income not exempt from IRPF obtained by the taxpayer in 2023 amounted to 1,500 euros.

Solution:

Information	Subject	Registered values	Fiscal values
Revenues	Fee	124,000	124,000
	Self-consumption	--	600 ⁽¹⁾
	Conferences	10.800	10.800 ⁽²⁾
	Variation of existences	3,000	3,000 ⁽³⁾
	Total income	137,800	138,400
Bills	Wages and salaries	18.900	17,700 ⁽⁴⁾
	Social Security	5.900	5.900
	Special System for Self-Employed Workers	3.300	3.300
	Shopping	19,000	19,000 ⁽⁵⁾
	Acquisition of books and magazines	1,300	1,300
	Financial expenses	1,100	1,100
	Provisions for the year for amortization of tangible fixed assets (premises and radiological equipment)	7.900	7.900 ⁽⁶⁾
	Input VAT	1,600	1,600 ⁽⁷⁾
	Non-state taxes	1,700	1,700
	Supply (electricity, water, gas, telephone and internet)	7.800	7.800
	Repair conservation	3.800	3.800
	Cleaning of the premises (other external services)	4.500	4.500
	Community/consultation receipts (other external services)	1,700	1,700
	Attendance at the 6th Congress (Other tax-deductible items)	1,000	1,000
	Total spends	79,500	78,300 ⁽⁸⁾
	Set of deductible provisions and expenses that are difficult to justify	--	2,000 ⁽⁹⁾
Net performance		58,300	58.100
Reduced net yield			58.100 ⁽¹⁰⁾
Total reduced net performance			58.100 ^(eleven)

Notes to the table:

⁽¹⁾The income must include 600 euros for personal consumption, based on the market price of the 10 x-rays performed on his son. ^(Back)

⁽²⁾The amounts received for "Conferences and publications" are considered income from the professional activity carried out by the taxpayer. ^(Back)

⁽³⁾The variation between the initial stock (13,100) and the final stock (16,100) determines an increase of 3,000 euros at the end of the year compared to the beginning, that is, a positive variation that must appear as full income under the heading "Variation in stock (increase in final stock)". ^(Back)

⁽⁴⁾Of the amount recorded under "wages and salaries", 1,200 euros given to his spouse for work at the clinic during the month of July do not have such character, as the legal requirements for this were not met. These requirements relate specifically to the regularity and continuity of the work performed, as well as the existence of an employment contract and affiliation to the corresponding Social Security system. ^(Back)

⁽⁵⁾Purchases are listed in full as a deductible expense. However, to determine the radiological and medical material consumed in the year, this heading is completed with the “Valuation of stock” heading (which will appear as income when the value of the final stock is greater than the value of the initial stock and as an expense when the opposite occurs, that is, the valuation of the final stock is less than that of the initial stock).

In this case, the variation in existence has been included as positive as income (+3,000) and the purchases of material as expense (-19,000), which determines by difference the material consumed (16,000).

For these purposes, it must be taken into account that to determine the radiological and medical material consumed in the exercise, the following operation must be carried out: 13,100 (initial stock) + 19,000 (purchases made) – 16,100 (final stock) = 16,000 euros (purchases consumed).

⁽⁶⁾The amortizations carried out correspond to the effective depreciation of the fixed assets, so their amount constitutes a tax-deductible expense. ^(Back)

⁽⁷⁾The VAT borne is deducted as an expense as it is an activity exempt from this tax which does not give the right to deduct the borne contributions. ^(Back)

⁽⁸⁾Although both the consulting room and the X-ray machine are considered to be affected assets, the sale of said assets gives rise to capital gains or losses that, as such, are not included in determining the net income from the economic activity. The quantification and taxation of capital gains derived from the transfer of affected assets is discussed in Chapter 11 "Capital gains and losses" of this Manual. ^(Back)

⁽⁹⁾As it is in the simplified direct estimation mode, it can deduct 7% of the positive net income in general (the positive difference between the total income and other tax-deductible expenses) as deductible provisions and expenses that are difficult to justify, with a limit of 2,000 euros per year. In this case, you can deduct 2,000 euros if 7% of your net income exceeds this amount: 7% (138,400 – 78,300) = 4,207 euros. ^(Back)

⁽¹⁰⁾Since there are no returns with a generation period of more than two years or which are considered to be obtained in a notoriously irregular manner over time, the reduced net return from the activity coincides with the net return amounting to 61,400 euros. ^(Back)

^(eleven)The total reduced net income coincides with the reduced net income amounting to 61,400 euros since does not meet the requirements for the application of the reduction for the exercise of certain economic activities in article 32.2.1 of the Income Tax Law which, if applicable, would have been incompatible with the deduction of 7% (with a maximum amount of 2,000 euros) for all the deductible provisions and expenses that are difficult to justify referred to in article 30.2.4 of the Tax Law). It also does not meet the requirements to apply the reductions in article 32.2.3 and 32.3 of the Personal Income Tax Law . ^(Back)