Among the measures introduced by the Royal Decree approved last Friday by the government and whose objectives is to support entrepreneurs, economic stimulus and job creation, it states a 20% reduction on the net income for those that are established as autonomous from now.
What does this mean?.. Net income is the difference between income and expenditure, which is the tax base subject to taxation. That tax base will be lowered, thus resulting tax will be lower. If we get 1000 Euros in net income, to apply the reduction will remain in 800, which will result in tax savings for the self.
The reduction may be applied if the following circumstances:
• The activity starts from January 1, 2013.
• The profit is determined by the direct estimation method.
• It has not exercised any other activity in the year prior to the actual start date. No activity shall be conducted that would never have generated positive net income.
The reduction applies to the first tax period in which the profit is positive and the next. That is, if I start my business in 2013 but I get no benefits until 2014, can I apply the reduction in that year and in 2015. If different activities are performed simultaneously and meet all the requirements to benefit from this measure, the reduction will start being implemented in the tax period in which the sum of the positive net returns of both activities is positive, and will do on such amount.
The maximum amount of net income on which you can apply this reduction is 100.000 Euros per year. However, it can’t be applied in the tax periods in which more than 50% of revenue comes from a person or entity from which the taxpayer had obtained employment income in the year prior to the start date of the activity. If I have worked as an employee, I can not register myself as self to bill my previous contractor and obtain a lower taxation.
For further details please contact VP Advisers.
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