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Practical manual for Income Tax 2023.

Rules for computing the maximum magnitude of exclusion

General rules

Regulations: See art.3.1. d) Order HFP /1172/2022, of November 29 ( BOE of December 1).

In order to determine for each activity whether the magnitude corresponding to it exceeds or not the maximum amounts indicated in the previous list, the following particularities must be taken into account:

a. The amount “employees ” shall include all persons, whether salaried or non-salaried, who are effectively employed in the principal activity and in any other accessory activity included in the scheme. Its amount shall be determined by the weighted average corresponding to the period in which the activity was carried out during the immediately preceding year.

To determine the weighted average, the following rules will be applied exclusively:

  • Only the number of hours worked during the period in which the activity was carried out during the immediately preceding year will be taken into account.

  • A non-salaried person ## , who works in the activity for at least 1,800 hours/year. When the number of hours worked per year is less than 1,800, the amount of the non-salaried person will be estimated as the proportion existing between the number of hours actually worked in the year and 1,800.

    However, the entrepreneur will be counted as a non-salaried person. In cases where it can be proven that less than 1,800 hours/year have been dedicated due to objective reasons, such as retirement, disability, multiple activities or temporary closure of the operation, the actual time dedicated to the activity will be counted. In these cases, for the quantification of the tasks of management, organization and planning of the activity and, in general, those inherent to the ownership of the same, the entrepreneur will be computed at 0.25 persons/year, except when a higher or lower effective dedication is accredited.

  • A person will be considered a salaried employee if he or she works the number of annual hours per worker established in the corresponding collective agreement or, failing that, 1,800 hours/year. When the number of hours worked per year is lower or higher, the amount of the salaried person will be estimated as the proportion existing between the number of hours actually worked and those established in the collective agreement or, failing that, 1,800.

b. The magnitudes “vehicles ” and “ trailers ” refer, respectively, to the maximum number of vehicles or trailers that are used on any day of the year for the development of the main activity and any other accessory activity included in the method.

Important : In the first year of carrying out the activity, the number of people employed or vehicles or trailers at the start of the activity will be taken into account.

When the maximum magnitude is exceeded in any activity in a calendar year, taxpayer will be excluded, starting from the immediately following year , from the objective estimation method, and must determine its net income using the direct estimation method, simplified modality, provided that the requirements established for said modality are met and its application is not waived, in which case the normal modality of said method will be applicable. 

The requirements established for the application of the simplified form of the direct estimation method, and the effects of waiving it, are discussed in Chapter 7 .

Special rules

In order to determine the magnitudes excluded from the objective estimation method, not only the specific magnitude corresponding to the economic activities carried out by the taxpayer must be computed, but also those corresponding to those carried out by the spouse, descendants and ascendants, as well as by the entities under the income attribution regime in which any of the above participate, in which the following circumstances occur:

a. That the economic activities developed are identical or similar .

For these purposes, economic activities classified in the same group in the Tax on Economic Activities will be deemed to be identical or similar.

b. That there is a common direction for such activities, sharing personal or material means .

In the case of entities under an income attribution regime not only the specific magnitude corresponding to the economic activity carried out by the entity itself under an attribution regime must be computed, but also those corresponding to those carried out by its partners, heirs, commoners or participants; the spouses, descendants and ascendants of these; as well as by other entities under an income attribution regime in which any of the above persons participate, in which the circumstances indicated above occur.