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Practical Guide to Income Tax 2025. Part 1.

Previous issue: small business concept

Regulations: Art. 101 LIS

In general

For the purposes of applying the tax benefits discussed in this section, Companies considered to be small-sized in the 2025 financial year are those in which the net amount of turnoverin the immediately preceding tax period (fiscal year 2024) was less than 10 million euros, whatever the net amount of turnover in the financial year itself.

Special rules

  • When the company is newly created, the net amount of the turnover will refer to the first tax period in which the activity is actually carried out, increasing said figure proportionally to the year if the period of exercise has been less than 12 months.

  • If the immediately preceding tax period had a duration of less than a year, or the activity had been carried out over a period of time that was also shorter, the net amount of the turnover will be increased proportionally to the year.

  • Group of companies: In the event that a natural person, alone or jointly with his or her spouse or other natural persons related by direct or collateral ties, by blood or marriage, up to the second degree inclusive, is related to the entities of which they are partners in any of the cases referred to in article 42 of the Commercial Code, regardless of the residence of the entities and the obligation to prepare consolidated annual accounts, the net amount of the turnover shall refer to the set of entities or companies belonging to said group, taking into account the eliminations and additions that correspond by application of the accounting regulations.

  • In the event that the same natural person carries out several economic activities, the net amount of the turnover will refer to the set of all those carried out.

  • Entities under income allocation regime: The net amount of the turnover will be determined taking into account exclusively the set of economic activities carried out by said entities.

Temporal scope of application of tax incentives when the small company exceeds 10 million euros in turnover

Small companies that reach or exceed a turnover of 10 million euros in a tax period may, however, continue to apply the tax incentives of their special tax regime during the three tax periods immediately following that period, provided that they have met the conditions to be considered as small in that period (in which they reach or exceed the limit of 10 million) and in the two tax periods prior to that last period.

This measure also applies to the event in which said limit is exceeded as a result of a business restructuring under the tax regime established in Chapter VII of Title VII of the LIS , provided that the participating entities that have carried out such operation meet the conditions to be considered as small in size both in the tax period in which the operation is carried out and in the two tax periods prior to the latter.

Examples

  1. Mrs. VGC has been the owner of a company since 1996 with a net turnover of:

    • Exercise 2022: 3,700,000 euros.
    • Exercises 2023 and 2024: 8,300,000 euros.
    • Exercise 2025: 10,045,000 euros.

  2. Mr. JLT He owns a company whose net turnover in 2024 was 10,100,000 euros.

  3. Mr. SMG He has been the owner since July 1, 2024 of a company whose net turnover up to December 31 of that year was 4,600,000 euros.

  4. Mrs. ABM He has been the owner since September 30, 2025 of a company whose net turnover until December 31 of that year was 60,000 euros.

Determine which companies in the year 2025 are considered to be small businesses.

Solutions:

  1. The company described is of small size in the 2025 financial year, since the net amount of its turnover in the year 2024 is less than 10 million euros. Furthermore, even if the turnover exceeded 10 million euros in the 2025 financial year, it will be able to continue applying the tax benefits of this special regime in the 2026, 2027 and 2028 financial years since in the 2024 financial year, as well as in the two previous years, 2023 and 2022, it met the limits of net turnover to be considered as a small business (less than 10 million euros in 2024, 2023 and 2022).

  2.  The company described is not of small size in the 2025 financial year, whatever the net amount of its turnover in this financial year.

  3. The company described is of small size in the 2025 financial year, since the net amount of its turnover in the 2024 financial year raised to the annual figure was 9,200,000 euros, so it does not exceed the established figure of 10 million euros.

  4. The company described is of small size in the 2025 fiscal year. It should also be noted that this tax classification will also be applicable in the 2026 fiscal year, because when the net amount of turnover is raised to the annual amount, the resulting amount (240,000 euros) does not exceed the maximum amount set at 10 million euros.

Note: the determination of the net amount of turnover is carried out in accordance with the comments made on this subject in this same Chapter.