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All You Need to Know About Spanish IRPF

Tax Agency (Hacienda)

Spanish IRPF

One of the most important taxes in Spain is the Personal Income Tax or Spanish IRPF. It is a fairly complex tax. For this reason, in this article, we are going to see only what you need to know about personal income tax in a general way.

1. What is the Spanish IRPF?

One of the sections of this tax refers to economic activities. The incomes of these activities are the ones that, derived from personal labour and the joint capital, or only one of these factors, imply on the taxpayer the management of production means and/ or human resources, to intervene in the production or distribution of goods or services.

However, if in your case the activity is the rental of houses, you need to have an exclusive location and one employee fulltime for this to be an economic activity. To determine the income of economic activity, we can use several types of estimates.

2. Normal direct estimate

The normal direct estimate is applied if the amount of the entrepreneur’s turnover exceeds 600.000€, or we could apply the simplified direct estimate or the objective one if he has waived the use of this means. 

To proceed to the waive, we must submit form 036 or 037 in the month of December before the period we wish for it to take effect. Alternatively, indicate before starting the activity.

In this type of estimate, we must have accounting following the commercial code, and calculate the net income by the difference between accounting income and deductible expenses:

> Accounting income: the one derived from the sale/ rendering of services, self-consumption of the entrepreneur and rewards.

> Deductible expenses: those required for the completion of your activity. These are, for example, the purchase of goods, personnel expenses, depreciation, etcetera.

3. Simplified direct estimate

We apply the simplified direct estimate to those entrepreneurs whose turnover of the previous year does not exceed 600.000 € and who have not waived the right to apply this method of calculation.

In this format, the net income is calculated the same way as in the standard direct format, but with specific differences:

> We add deductible provisions as 5% of the positive net income excluding this concept.

> Depreciation on fixed assets will be deductible expenses if the linear depreciation tables are applied. 

Also, if you select this format, you must have official accounting, but only an income and expense book, investment assets and provisions for funds and supplements.

4. Objective estimation (“Módulos”)

We apply the objective estimate to entrepreneurs who meet the following requirements:

  • Their activities are included and within limits in the Order of the Ministry of Economy and Finance for this regime.
  • That your volume of income is less than € 450,000.
  • That the volume of purchases from the previous year does not exceed € 300,000.
  • That all activities are carried out within the scope of personal income tax (IRPF).
  • That your application has not been renounced.
  • That they are taxed in the simplified regime of VAT, or agriculture, livestock and fishing, or equivalency surcharge.

In this case, we calculate the net performance using modules, such as square meters of premises, kilowatts of energy consumed, etc. You should multiply the units used in the activity of each module by the amount set for that module. 

We can apply reductions to this net return, both for employment incentives or amortizations. Besides, we apply corrective indexes and other reductions until getting the net return on the activity.

It is only mandatory to keep the invoices issued and received and the supporting documents of the applied modules, in addition to the register of investment assets if amortizations are applied.

5. Instalment payments for Spanish IRPF

The objective of the instalment payments is to prepay the income of the Personal Income Tax to the Tax Agency, in addition to grading the effort of the taxpayers to pay it.

We must again distinguish between direct and objective estimates since the way to pay instalment payments is different. 

We summarize the most important points in the following diagram:

a) Normal or simplified direct estimation:

  • Form: 130
  • Submission dates: 1-20 April, July and October; and between January 1-30.
  • Amounts:

– Business activities: 20% of the net return in the quarter to which the instalment payment refers.

– Professional activities: 20% net performance for the quarter.

– Agricultural, livestock, forestry and fishing activities: 2% of income without counting subsidies and compensation.

b) Objective estimation:

  • Form: 131
  • Submission dates: 1-20 April, July and October; and between January 1-30.
  • Amounts:

– Business activities: 4% as a general rule; 3% if you have a salaried employee; 2% if you do not have a salaried worker.

– Agricultural, livestock and forestry activities: 2% of the income for the quarter without counting subsidies and compensation.

In both cases, if in a quarter there is no amount to pay, a negative declaration must be submitted.

Accounting Books For Self-employed In Spain

Withholdings and Form 130 In Spain

Investment Assets for Self-employed in Spain

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