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Practical Handbook for Companies 2021

Freedom to depreciate

Regulation: Article 102 LIS

Remember:

This case of freedom of depreciation of Article 102 of the LIS is incompatible with the new case of freedom of depreciation for investments made in the automotive sector regulated in the sixteenth additional provision of the LIS, so that small entities will have to opt to apply one of the two tax incentives.

1.Requirements

Small enterprises may apply the freedom of depreciation in accordance with the following conditions:

  • They must have the status of small enterprises in the tax period in which the investment is made available.

  • This must be new items of tangible fixed assets or investment property used for economic activities.

    These elements must be 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 reduced size status.

    • Commissioned by means of a contract for the execution of work signed in the tax period in which it has the status of a small company and made available to the company within 12 months of the conclusion of the contract.

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

    This regime will also apply to these items when they have been the subject of a leasing contract and placed at the disposal of the company in the tax period in which it has the reduced size status, provided that the purchase option is exercised.

  • During the twenty-four months following the date of the beginning of the tax period in which the assets acquired are put into operation, the total average workforce of the company must be increased compared to the average workforce of the previous twelve months and this increase must be maintained for a further period of 24 months.

    For the calculation of the company's total average workforce and its increase, the persons employed shall be taken into account, in the terms provided for in the labour legislation, taking into account the contracted working day in relation to the full working day.To not require any specific requirement to the modality of employment contract, is immaterial for said calculation the contract to be indefinite, temporary, training, etc.

    Likewise, the contracted worker giving entitlement to the deduction provided for in Article 38 of the LIS will not be computed for the purposes of the increase in the workforce established in Article 102 of the LIS.

  • The freedom of depreciation shall apply from the date of entry into operation of the eligible items.

  • For freely depreciable assets the accounting entry principle of Article 11.3 does not apply.1 of the LIS,, according to which expenses that have not been allocated for tax purposes in the profit and loss account or in a reserve account will not be deductible for tax purposes if so established by law or regulation.

    Therefore, even if the excess tax depreciation resulting from the application of the depreciation allowance is not accounted for, it is deductible in the corporate income tax base.

2.Investment limit

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

The freely depreciated amount may not exceed the acquisition value or production cost of the items being freely depreciated.

3.Non-compliance

In the event of non-compliance with the obligation to increase or maintain the workforce, , the full amount corresponding to the amount deducted in excess plus the corresponding interest for late payment must be paid to.

The payment of the full tax liability and late payment interest shall be made together with the self-settlement corresponding to the tax period in which one or other obligation has been breached (on payment of tax liability and late payment interest due to breach of the requirements to enjoy tax benefits, see the content of the boxes [00615] and [00616] "Increase due to loss of tax benefits for previous periods" and of the boxes [00617] and [00618] "Late payment interest" on page 14 bis of form 200, developed in Chapter 6 of this Practical Manual).