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Practical Manual of Companies 2020.

Freedom to depreciate

Regulation: Article 102 LIS

Remember:

This assumption of freedom of amortization of article 102 of the LIS is incompatible with the new assumption of freedom of amortization regulated in the Sixteenth Additional Provision of the LIS , so small entities will have to choose to apply one of the two tax incentives.

1. Requirements

Small companies may apply the freedom of amortization, in accordance with the following conditions:

  • They must have the status of small companies in the tax period of making the investment available.

  • They must be new elements of tangible fixed assets or real estate investments assigned to economic activities.

    These elements must be found in any of the following situations:

    • Acquired from third parties and made available to the company in the tax period in which it has the status of small size.

    • Commissioned through a work execution contract signed in the tax period in which it has the status of a small company and made available to the company within 12 months following completion of the same.

    • Built by the company itself with the same conditions established in the two previous points.

    This regime will also apply to these elements when they have been the subject of a financial leasing contract and made available to the company in the tax period in which it has the status of small size, to condition that the purchase option is exercised.

  • During the twenty-four months following the date of the beginning of the tax period in which the acquired assets come into operation, the total average workforce of the company must be increased with respect to the average workforce of the previous twelve months and said increase must be maintained for an additional period of another 24 months.

    For the calculation of the company's total average workforce and its increase the people employed must be taken, in the terms provided by labor legislation, taking into account the contracted day in relation to the full day. Since no specific requirement is required regarding the type of employment contract, it will be irrelevant for the purposes of said calculation whether the contract is indefinite, temporary, training, etc.

    Likewise, the hired worker who gives the right to one of the deductions provided for in article 37 of the LIS will not be counted for the purposes of the increase in staff established in article 102 of the LIS.

  • The freedom of amortization will be applicable from the entry into operation of the elements that can benefit from it.

  • Regarding assets that can be freely amortized the accounting entry principle of article 11.3 will not apply. 1 of the LIS, according to which expenses that have not been accounted for in the profit and loss account or in a reserve account will not be tax deductible if this is established by a legal norm or regulatory.

    Therefore, although the excess tax depreciation derived from the application of the freedom of depreciation is not accounted for, it is allowed to be deducted from the corporate income tax base.

2. Investment limit

The maximum amount of the investment that can benefit from the freedom of amortization is the result of multiplying the amount of 120,000 euros by the increase in the company's total average workforce during the following 24 months to the date of the beginning of the tax period in which the acquired assets come into operation with respect to the average workforce of the previous 12 months, calculated with two decimal places.

The freely amortized amount cannot be higher than the acquisition value or production cost of the elements that are freely amortized.

3. Non-compliance

In the event that the obligation to increase or maintain the workforce is breached, the full amount that would have corresponded to the excess amount deducted plus the corresponding late payment interest must be paid.

The payment of the full amount and late payment interest will be made together with the self-assessment corresponding to the tax period in which one or another obligation has been breached ##2##(on payment of fees and late payment interest due to non-compliance with the requirements to enjoy tax benefits, see the content of boxes [00615] and [00616] « Increase for loss of tax benefits in previous periods » and boxes [00617] and [00618] « Default interest» on page 14 bis of model 200, developed in Chapter 6 of this Practical Manual).