Income Tax: Deductibles, Net Income Calculation, and Capital Gains
Article 26. Deductibles and Reduced Costs
1. Deductible Expenses for Net Income Determination
For the determination of net income, only the following expenses shall be deducted from the returns intact:
Administration Fee and Deposit of Securities: This includes amounts that impact investment service companies, banks, or financial institutions, as per Law 24/1988 of 28 July, the Securities Market. These expenses cover the repayment of benefits derived from carrying out deposit services on behalf of securities holders, represented in the form of government securities or book entries.
Amounts involving discretionary management of investment portfolios are not deductible, where there is a disposition of investments made by account holders in accordance with their mandates.
Income from Technical Assistance, Lease of Movable Property, Business, or Mine: Deductible expenses include amounts required to obtain the income and, if applicable, the amount of damage suffered by the property or rights from which the revenue comes.
2. Reduction of Net Income
Net income as defined in Article 25, paragraph 4 of this Act, with a generation period exceeding two years or classified as irregular in time by regulations, shall be reduced by 40%.
When calculating the generation time for returns charged in installments, the number of years of division must be considered, as established by regulation.
Article 28. General Rules for Calculating Net Return
1. Determination of Net Return
The net return of economic activities is determined by income tax rules, subject to the special rules contained in this Article, Article 30 for direct estimation, and Article 31 for objective assessment.
For the purposes of Article 108 of the Income Tax Act, all economic activities carried out by the taxpayer are taken into account when determining the net amount of turnover.
2. Exclusion of Gains and Losses from Assigned Assets
Gains or losses derived from assets assigned to economic activities are not included in the determination of net income. These are quantified as provided in Section IV of this chapter.
3. Allocation and Retirement of Assets
The allocation of assets and liabilities or the retirement of fixed assets by the taxpayer does not constitute impairment of assets, provided that the property or rights remain part of their heritage.
It is understood that there has been no impairment if the disposal of property or rights occurs up to three years later.
4. Normal Market Value
The normal market value of goods or services covered by the activity will be used when the taxpayer assigns or gives them to others for free or for their own use or consumption.
Article 30. Rules for Net Income Determination on Direct Estimation
1. Direct Estimation Method
The determination of earned income is generally made using the direct estimation method, which has two modes: normal and simplified.
Simplified Method
The simplified method applies to economic activities with a net turnover not exceeding 600,000 euros in the previous year for all the taxpayer’s activities, unless they renounce its application as per established regulations.
Resignation or Exclusion from Simplified Method
If a taxpayer resigns from or is excluded from the simplified method, they must determine the net income of all economic activities using the normal mode of direct estimation for the next three years, under the conditions established by regulation.
Article 33. Profit and Loss of Heritage
1. Gains and Losses
Gains and losses are changes in the value of a taxpayer’s assets that manifest upon any change in the composition of that court.
2. No Alteration in Capital Composition
It is estimated that there is no alteration in the composition of capital in the following cases:
Division of the commonplace.
Dissolution of the conjugal partnership or ending the matrimonial participation.
Dissolution of community property or cases of separation of community.
3. No Capital Gain or Loss
It is estimated that there is no capital gain or loss in the following assumptions:
Reductions in Capital: On the occasion of profit transfers due to the taxpayer’s death.
Lucrative Enterprise or Share Transfers: At the termination of the matrimonial regime of separate property when legal imposition or court decision awarding occurs for reasons other than spousal alimony.
Contributions to Heritage Protection: On the occasion of contributions made to heritage protection for persons with disabilities.
The assumptions in this paragraph shall not, under any circumstances, result in updates to the values of the granted property or rights.
4. Exempt Capital Gains
Capital gains tax is exempt in the following cases:
Donations to Specific Entities: Donations made to entities referred to in Article 68.3 of this Act.
Transfer of Residence for Over 65s or Dependent Individuals: Transfer of their residence for individuals over 65 years old or for people experiencing severe or high dependency, in accordance with the law for the promotion of personal autonomy and care for dependent people.
Payment for Specific Debts: Payment provided for in Article 97.3 of this Law and tax debts referred to in Article 73 of Law 16/1985 of 25 June on Spanish Historical Heritage.
5. Non-Deductible Capital Losses
The following are not counted as capital losses:
Unjustified losses.
Losses due to consumption.
Losses from transmissions due to profit by acts inter vivos or donations.
Losses due to gambling.
Losses from Asset and Liability Transfers with Repurchase: Losses derived from the transfer of assets and liabilities when the transferor repurchases them within one year following the date of such transmission. This capital loss will be integrated when the subsequent transfer of the asset or liability occurs.
Losses derived from the transfer of securities or shares admitted to trading on any of the official secondary securities markets.
Losses derived from the transfer of securities or shares not traded on any of the official secondary securities markets.
Article 42. Income in Kind
1. Definition of Income in Kind
Income in kind constitutes the use, consumption, or production, for particular purposes, of property, rights, or services free of charge or at prices below normal market value, even if it does not involve actual expenditure for the recipient.
When the payer of the income delivers cash to the taxpayer to acquire this property, rights, or services, the income shall be treated as cash.
2. Exclusions from Income in Kind
The following are not considered income in kind:
Shares in the Company: Delivery to active workers, free of charge or at a lower price than the normal market, of shares in the company or other companies in the group of companies, not exceeding 12,000 euros per year for each worker, under the conditions established by regulation.
Employee Training and Development: Amounts for the upgrade, training, or retraining of employees, when required by the development of their activities or characteristics of jobs.
Discounted Products in Canteens: Deliveries to employees at discounted prices of products sold in bars, stores, canteens, or social facilities. This constitutes a supply of products at discounted prices carried out in canteens through indirect service formulas, not exceeding the amount determined by regulation.
Use of Goods for Social and Cultural Services of Trainees: This includes local spaces, duly approved by the competent public administration, intended for companies or employers to provide the first cycle of primary education to children of their workers, as well as hiring, directly or indirectly, with duly authorized third-party services, as established by regulation.
Insurance Premiums: Premiums or contributions paid by the company under contract for labor accident insurance or worker liability.
Health Insurance Premiums: Premiums or contributions paid to insurance companies to cover sickness, when they meet the following requirements and limitations:
The health cover available to the worker may also extend to their spouse and descendants.
The premiums or contributions paid do not exceed 500 euros per year for each of the persons mentioned in the preceding paragraph. Any excess over this amount will be considered income in kind.
Schooling Services: Provision of services for preschool, kindergarten, primary, compulsory secondary school, and vocational training schools approved by the relevant authorities, for the children of its employees, free of charge or at prices below normal market value.
Public Transport for Employees: Amounts paid to entities responsible for providing public passenger transport services to facilitate the movement of employees between their residence and workplace, with a limit of 1,500 euros per year for each worker.
ach worker.