Provisions regarding the Personal Income Tax

Through Order No. HFP/1335/2021, the Ministry of Finance and Public Function developed for the year 2022 the objective estimation method for Personal Income Tax and the simplified special regime for Value Added Tax.

1. Exceptions

Unlike the activities included in the above-mentioned regimes, which are listed in the aforementioned resolution, there are also those to which the objective assessment method of Personal Income Tax and the special simplified Value Added Tax regime will not be applicable when they exceed the following magnitudes;

• Magnitude in terms of the volume of income for the set of economic activities:
  • That the economic activities carried out are identical or similar. To these effects, it will be understood that the economic activities classified in the same group in the Tax on Economic Activities are identical or similar.
  • That there is common management of such activities, sharing personal or material means.
• Magnitude according to the volume of income for the set of agricultural, forestry, and livestock activities:
  • 250,000 euros per year of the volume of income in the following activities:
    • “Independent livestock farming.”
    • “Livestock breeding, keeping, and fattening services.”
    • “Other work, services, and accessory activities carried out by farmers or livestock farmers that are excluded or not included in the special regime for agriculture, livestock, and fishing of the Value Added Tax.”
    • “Other works, services and accessory activities carried out by holders of forestry activities that are excluded or not included in the special regime of agriculture, livestock, and fishing of the Value Added Tax.”
    • “The use corresponding to the transferor in agricultural activities carried out under a sharecropping regime.”
    • “Exploitations corresponding to the transferor in forestry activities carried out under sharecropping.”
    • “Agricultural or livestock susceptible to be included in the special regime of agriculture, livestock, and fishing of the Value Added Tax.”
    • “Forestry susceptible to be included in the special regime of agriculture, livestock, and fishing of the Value Added Tax.”
    • “Processes of transformation, elaboration or manufacture of natural, vegetable or animal products, which require registration under a heading corresponding to industrial activities in the Rates of the Tax on Economic Activities and are carried out by the owners of the farms from which said natural products are obtained directly.”

2. Deadlines for waivers – Objective Assessment

The taxpayers of the Personal Income Tax who carry out activities to which the objective estimation method is applicable and wish to renounce or revoke their renunciation for the year 2022, will be able to exercise this option until December 31, 2021.

In this sense, the waiver or revocation must be made under the provisions of the procedures for tax management and inspection and for the development of the common rules of the procedures for the application of taxes, approved by Royal Decree 1065/2007, of July 27.

It is important to point out that the waiver will also be understood to have been made when the return corresponds to the installment payment for the first quarter of the calendar year in which the form provided for the direct estimation method is filed within the regulatory period.

On the other hand, in the case of commencement of the activity, the waiver will also be deemed to have been made when the installment payment corresponding to the first quarter of the activity is made within the regulatory period in the form provided for the direct estimation method.

3. Reduction of the net income calculated

The regulations state that, concerning the reduction in 2022, the net income calculated by the objective estimation method will have the following characteristics;

1. The taxpayers who determine the net yield of their economic activities by the objective estimation method will be able to reduce the net yield of modules obtained in 2022 by 5%.
2. In the case of activities included in Annex I of this Order, the reduction foreseen in paragraph 1 above will be applied to the net yield of modules referred to in instruction 2.3 for the application of the signs, indexes, or modules in the Personal Income Tax of Annex I of this Order.
3. This reduction will be taken into account to quantify the net yield for the fractioned payments corresponding to 2022.

Source: Boletín Oficial del Estado 02/12/21