Requirements to be entitled to this reduction
Taxpayers who meet each and every one of the following requirements are entitled to this reduction:
a) That the net income from the economic activity is determined according to the direct estimation method.
However, if the net income is determined according to the simplified form of the direct estimation method, the reduction will be incompatible with the application of the deductible percentage of 7% (with a maximum amount of 2,000 euros) for all deductible provisions and expenses that are difficult to justify referred to in article 30.2.4 of the Tax Law.
Clarifications:
In joint taxation, if only one of the spouses meets the requirements to apply the reduction, the fact that he or she chooses to apply it does not prevent the other spouse from applying the 7% deduction for deductible provisions and expenses that are difficult to justify (with a limit of 2,000 euros).
If both spouses meet the requirements to apply the reduction, the fact that one of them chooses to apply it does not prevent the other spouse from applying the 7% deduction for all deductible provisions and expenses that are difficult to justify (with a limit of 2,000 euros). However, in this case the amount of the reduction may not be greater than the net income from the activities of the spouse who has opted to apply the reduction.
b) That all deliveries of goods or services are made to a single person , natural or legal, not linked in the terms of article 18 of the LIS , or that the taxpayer is considered a self-employed worker economically dependent in accordance with the provisions of Law 20/2007, of July 11, of the Statute of Self-Employed Workers ( BOE of July 12) and the client on whom he/she economically depends is not a linked entity in the terms previously mentioned.
For these purposes, in accordance with article 11 of the aforementioned Law 20/2007, an economically dependent self-employed worker is considered to be one who carries out an economic or professional activity for profit and on a regular, personal, direct and predominant basis for a natural or legal person, called a client, on whom he or she depends economically because he or she receives from him or her at least 75 percent of his or her income from work and economic or professional activities.
Regarding the LIS see Law 27/2014, of November 27, on Corporate Tax.
Associated persons or entities:
To determine when there is a link, the provisions of article 18.2 of the LIS must be taken into account, in which the following are considered linked persons or entities:
- An entity and its partners or shareholders.
- An entity and its directors or administrators, except with regard to remuneration for the performance of their functions.
- An entity and the spouses or persons related by kinship, in a direct or collateral line, by consanguinity or affinity up to the third degree of the partners or participants, directors or administrators.
- An entity and the directors or managers of another entity, when both entities belong to a group.
In cases where the link is defined based on the relationship of the partners or participants with the entity, the participation must be equal to or greater than 25%. The reference to administrators will include those de jure and those de facto. In cases where the link is not defined based on the relationship between partners or participants-entity, the percentage of participation to be considered will be 25%.
In these cases, the taxpayer of IRPF must comply with the documentation obligations of related-party transactions under the terms and conditions established in Chapter V (articles 13 to 16) of the Corporate Tax Regulations, approved by Royal Decree 634/2015, of July 10 ( BOE of July 11).
c) That the set of deductible expenses corresponding to all economic activities developed by the taxpayer does not exceed 30% of the declared gross income .
d) That, during the tax period, all formal obligations provided for in article 68 of the Personal Income Tax Regulations are fulfilled.
The formal accounting and registration obligations of taxpayers who are owners of economic activities are discussed in Chapter 6.
e) That no income from work is received in the tax period.
However, this requirement will not be deemed to be breached when unemployment benefits or any of the benefits derived from the social security systems referred to in article 17.2 of the Personal Tax Law are received during the tax period, that their amount does not exceed 4,000 euros per year.
In these cases and provided that all the established requirements are met, both the reduction for obtaining work income and the reduction for carrying out certain economic activities will be applied.
Please note that Social Security benefits for temporary disability are classified as income from work under the IRPF tax, in accordance with article 17.2.a)1 of Law IRPF , which as such includes not only the total benefit received, but also the amount of contributions to the Special Regime for Self-Employed Workers of Social Security (RETA) that, where applicable, have been paid by the collaborating mutual insurance company of Social Security.
f) That at least 70 percent of the income for the tax period is subject to withholding or payment on account.
g) That no economic activity is carried out through entities under an income attribution regime.
Note: When the taxpayer opts for joint taxation, he/she will be entitled to the reduction for economically dependent self-employed workers or those with a single unrelated client when he/she individually meets the requirements indicated above to be entitled to its application and its amount may not exceed the net income from the economic activities of the members of the family unit that generate the right to its application.