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Practical manual for Income Tax 2023.

Practical Case

Special category bar (heading IAE : 673.1), located in rented premises where, since its opening in 1995, 3 full-time salaried employees have worked with the owner in accordance with the Collective Agreement for the sector, which sets a working day of 1,800 hours per year. The owner does not carry out any other economic activity.

In the previous year (2022), the number of units of the "salaried personnel" module amounted to 3 people.

In the 2023 financial year, the following data must be taken into account.

  1. On September 1, 2 new workers over 19 years of age were hired and remained in the company as of December 31, 2023, each of whom has totaled 600 hours of work in that year. Total remuneration paid to staff in 2023 amounted to 41,500 euros.

  2. The bar is 10 metres long and has 8 tables for four people.

  3. The contracted electrical power is 35 kilowatts and a type "B" gaming machine is installed on the premises.

  4. Of the fixed assets assigned to the activity, the owner only keeps invoices for the coffee machine, a thermal display case, the air conditioning installation and the 8 tables with their chairs. The data contained in your investment assets register are as follows:

    Element Beginning of use Cost price Accumulated amortization as of 31-12-2022
    Furniture (tables and chairs) 01-06-2018 1,500 euros 1,500 euros
    Coffee maker 01-06-2019 9,400 euros 8,400 euros
    Thermal display case 01-07-2020 4,000 euros 2,500 euros
    Air conditioner installation 01-08-2020 6,600 euros 3.900 euros

  5. To replace the establishment's tables and chairs, the owner purchased 8 new tables and 32 chairs on February 1, 2023 for €2,400.00, without the unit value of any of said pieces of furniture exceeding the amount of €601.01.

    The furniture was installed in the bar on the 15th of the aforementioned month. He sold the old furniture for 510.00 euros.

  6. On 10 August 2023, a flood occurred in the bar, causing damages whose repair amounted to 1,200.00 euros, without the owner's insurance policy covering the aforementioned risk. On September 1, the owner of the activity submitted a document to the Tax Agency corresponding to his tax domicile, reporting the aforementioned facts and providing an invoice for the repairs carried out along with the document proving the flooding issued by the local fire service. The competent services of the Tax Agency Administration have verified the certainty of the cause that motivated the extraordinary expense and its amount.

  7. The taxpayer has not obtained other income in the year.

Solution

Phase 1: Determination of prior net performance.

1. Determination of the number of computable units of each of the modules applicable to activity .

Module 1. Salaried staff

Previous note: Salaried staff is quantified based on the number of hours actually worked annually by each worker in the activity.

  • 3 people all year round: (3 x 1,800 hours ÷ 1,800) = 3.00 people.

  • 2 people hired on 01-09-2023: (2 x 600 hours ÷ 1,800) = 0.66 people

  • Total: 3.66 people.

Module 2. Non-salaried staff: The owner: 1.00 person

Module 3. Electrical power . Contracted kilowatts: 35.00 kWh

Module 4. Tables . Tables for 4 people: 8 tables

Module 5 . Bar length. Linear meters: 10.00 ml

Module 6. Type "A" recreational machines.

The premises do not have any type "A" gaming machines. Therefore, number of units = 0.00

Module 7. Type "B" recreational machines.

The premises has 1 type “B” gaming machine installed: Therefore, the number of units is: 1.00 machine.

2. Application to the number of units of each module of the annual yield per unit before amortization established in Order HFP /1172/2022, of November 29 (BOE of December 1).

Module No. of units Yield per unit Performance per module
1. Salaried staff 3.66 4.056,30 14,846.06
2. Non-salaried Staff 1.00 15,538.66 15,538.66
3. Electrical power 35,00 321.23 11,243.05
4. Tables 8.00 233.04 1,864.32
5. Bar length 10.00 371.62 3,716.20
6. Type "A" machines 0.00 957.39 0.00
7. Type "B" machines 1.00 2.903,66 2.903,66
Previous net performance (sum) 50,111.95

Phase 2: Determination of reduced net income.

1. Minority for employment incentives .

  1. Minority coefficient due to increase in the number of salaried people .

    -Increase in the number of units of the "salaried personnel" module in 2023 compared to 2022:

    Number of units of the "salaried personnel" module in 2022: 3.00 people

    Number of units of the "salaried personnel" module in 2023: 3.66 people

    Increase in the number of units: 3.66– 3.00 = 0.66 people

    If both requirements are met, the positive difference between the number of units of the "salaried personnel" module in 2023 compared to 2022 will be multiplied by 0.40.

    Coefficient for increase in the number of salaried people: 0.40 x 0.66= 0.264.

  2. Reduction coefficient by sections of the number of units of the "salaried personnel" module.

    The coefficient by sections is applied to 3.00 (3.66- 0.66) units of the module as follows:

    Up to 1.00: 1.00 x 0.10 = 0.10

    Between 1.01 and 3.00: 2.00 x 0.15 = 0.30

    Reduction coefficient by sections: (0.10 + 0.30): 0.40

  3. Reduction coefficient for employment incentives.

    It is the result of adding the reduction coefficients by increase in the number of salaried people and by sections of the number of units of the "salaried personnel" module: 0.264 + 0.40 = 0.664

  4. Amount of the reduction for employment incentives.

    It is the result of multiplying the reduction coefficient by the annual performance per unit of the "salaried personnel" module: 0.664 x 4,056.30 = 2,693.38 euros.

2. Minority due to investment incentives .

Using the amortization table contained in Order HFP /1172/2022, of November 29 ( BOE of December 1), and applying the maximum linear amortization coefficients set therein, the amount of the reduction for investment incentives is determined as follows:

Minority due to investment incentives (sum) 6.050

Note to the table:

(1) The input VAT is not included in the acquisition value of the fixed assets, since the activity is subject to the simplified VAT regime. (Back)

(2) Despite having been in operation in the company until its closure due to sale, the old tables and chairs cannot be depreciated in 2023, since as of 31-12-2022 these items had already been fully depreciated. (Back)

(3) Since the amount that would result from the application of the maximum coefficient is higher than the amount pending amortization as of 31-12-2022, which amounts to 1,000 euros (acquisition value 9,400 - Accumulated amortization 8,400), the amortization has been carried out for this last amount. (Back)

(4) New tables and chairs can be freely depreciated because their unit value is less than 601.01 euros and because, in addition, the total amount of the new assets acquired in 2023 does not exceed the amount of 3,005.06 euros. (Back)
Heritage element Value acquisition(1) Maximum coefficient Amortizable period Amortization
Furniture (tables and chairs) 1,500 --- --- --- (2)
Coffee maker 9.400 25% All year 1,000(3)
Thermal display case 4.000 25% All year 1,000
Air-conditioning 6.600 25% All year 1,650
New tables and chairs (freely amortized) 2,400 100%(4) Irrelevant 2,400

3. Determination of reduced net income

Previous net performance: 50,111.95

less: Reduction for employment incentives: 2,693.38

less: Minority due to investment incentives: 6.050,00

equal to: Reduced net income (50,111.95–2,693.38–6,050) = 41,368.57

Phase 3: Determination of net module yield.

The only corrective index applicable in this example is the excess correction index, since the reduced net return exceeds the amount of 30,586.03 euros. Therefore:

Net return on modules = 30,586.03 + [1.30 x (41,368.57 – 30,586.03)] = 44,603.33 euros.

Phase 4: Determination of the net return of the activity.

The general reduction of 10% must first be applied.

Note: Article 61.Two of Law 31/2022, of December 23, on the General State Budget for the year 2023 ( BOE of December 24) by which the Fifty-fourth Additional Provision is added to the Law of Personal Income Tax and the First Additional Provision Order HFP /1172/2022, of November 29, by which the objective estimation method in Personal Income Tax is developed for the year 2023, have raised the general reduction applicable to the net income of modules obtained in the 2023 tax period to 10 percent.

Furthermore, since all the requirements established for this purpose have been met, the amount of the extraordinary expenses caused by the flood that occurred on August 10 must be deducted.

Therefore:

Net module yield = 44,603.33

less: General reduction (10% s/44,603.33) = 4,460.33

less: Extraordinary expenses due to exceptional circumstances: 1,200

equal to: Net income from the activity (44,603.33– 4,460.33–1,200) = 38,943

Phase 5: Determination of the reduced net return of the activity.

  1. Reduction for irregularity

    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 that determined in phase 4 above, which amounts to 38,943 euros.

    Comment : Capital gains or losses obtained as a result of the transfer of assets related to the activity (chairs and tables) must be declared in section F2 of the declaration.

  2. Reduction for the exercise of certain economic activities

    Since the income from economic activity exceeds 12,000 euros, the reduction in article 32.2.3 does not apply. of the Income Tax Law .

Determination of the total reduced net income of the activity.

The total reduced net income coincides with the total reduced net income of the activity = 38,943 euros