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As we progressed last week, we will be developing and explaining what are and what are the main components of the taxation of the autonomous. This week we will talk about income Tax income of the Natural Persons that taxes the income earned by the self-employed. As usually happens, when searching the Internet, we find many pages where we can find information about it, such as:- These and other similar provide information about it. You Must be careful to be reliable and contain the updated information. For this reason, and to pave the way, we have tried to rescue the most relevant information by exposing it in a clear and summarized way so that you have a simple and complete approximation to the subject. In Addition, at the end of the article we leave the link to the website of the Tax Agency where you can find more expanded information on these topics and many more. Started! What IS INCOME TAX? The withholdings of INCOME TAX are a kind of advance that every worker makes to Hacienda on account of the Declaration of the income. The Tax Agency subtracts from the payroll of the employees and the invoices of the self-employed, an amount of money for the future payments that will have to be made in the income statement. At the end of the fiscal year, if the withholdings have been too high the result of the declaration will be to return. In other words, the Treasury will give us the extra amount that we were retained. And if it is to pay, is that the withholdings have been low and we must enter the difference to the State. Any individual who obtains an income is obliged to make the annual declaration of it and tax according to their income. For this reason, as a self-employed person you are obliged to apply withholdings on each of your bills. However, some exceptions are contemplated:

  • As a general rule, taxpayers who have received income below the €22,000 gross annual single payer will be exempt from taxation. I mean, they can do it if they want to but they’re not obligated.

Nor is it necessary to declare public benefits for acts of terrorism, compensation for dismissal or cessation of workers, disability pensions, public scholarships… B. DIRECT ESTIMATION Or OBJECTIVE ESTIMATION?

  • Direct estimation Method: NET yield is calculated by the difference between incomes and deductible expenses. To specify what expenses are deductible and which are not, with nuances, we will refer to the corporate TAX regulations. It Has two modalities: normal and simplified.

1) Normal direct Estimation is generally applied to entrepreneurs and professionals who are not in the simplified modality or the module system. Yes, the taxation for entrepreneurs under this method will always occur when the amount of the turnover of the set of activities exerted by the taxpayer is greater than 600,000 euros annually in the preceding year. It shall Also be taxed under this method when the simplified direct estimate has been waived. 2) Simplified direct Estimation applies to businessmen and professionals as long as the following requirements are fulfilled:

-That their activity does not accept the regime of objective estimation.

 -That, in the previous year, the net turnover amount is not more than 600,000 euros. If the activity had started in the previous year, the net amount of the turnover would be raised per year.

-That Your application has not been waived.

 -That any activity exerted by the taxpayer is in the normal direct estimation regime.

As a general rule, those Self-Employed professionals who take the direct estimation scheme, must carry out the 4 quarterly declarations of INCOME TAX (model 130).

  • Method of objective estimation commonly referred to as modules: NET yield is not obtained through the difference between the income and expenses of the activity. In this case, the income will be determined by applying a series of objective units provided by the Tax Agency itself, such as the number of tables in a restaurant, the number of workers hired or, the meters of the bar of a bar, between Other.

As for taxation for entrepreneurs or freelancers, not all can tax on INCOME TAX with the method of objective estimation or modules. On the contrary, in order to be able to tax modules the activity performed must meet a number of requirements that the Tax Agency hardened in 2016 as a measure to fight tax fraud:-That The volume of full returns in the immediate year Above, does not exceed €250,000 for all economic activities, including agricultural, livestock and forestry activities. Transactions in which there is an obligation to issue an invoice when the consignee is an entrepreneur may not exceed 150,000 euros. -That the volume of purchases in goods and services in the previous year, excluding the acquisitions of fixed assets, does not exceed €250,000 annual. -Which have not expressly or tacitly waived the application of this scheme. -Which have not renounced or are excluded from the simplified VAT regime and the special simplified regime of the Canary Islands General Tax (IGIC). That They have not renounced the special regime of agriculture, livestock and fisheries of VAT, or the special regime of agriculture and livestock of the IGIC. -That no activity is in direct estimation, in any of its modalities. Taxation for modular entrepreneurs implies less complexity because it is not necessary to carry out an accounting adjusted to the Code of Commerce. Simply Keep The invoices issued, received and the supporting documents of the applied modules, in addition to the Register of investment goods, if amortizations are practised. In the case that the net performance is calculated by the volume of operations, a book of sales or revenues must also be carried, in addition to the book record of sales or income subject to 1% retention. C. INCOME tax And SELF-employed For self-employed persons obliged to comply with the income taxes, this is calculated differently depending on how long the professional has been discharged in the Special Regime of Self-employed Workers (RETA). Generally, the withholding type to be applied to invoices is 15% on the impossible basis. However, in the case of new freelancers in professional activities, in the year in which they are discharged and in the next two only have to apply 7%. The requirement to obtain this reduction is not to have been discharged in an economic activity in the previous twelve months. D. Income tax tranches the Income TAX section establishes the type of tax that we must bear when making the income statement. That Is to say, they are the ones that determine how much we must pay to the Hacienda each year according to our income and personal circumstances. They Are Dynamic indices, so each year varies depending on the decisions that the Government takes. Therefore it is important to be attentive to the novelties so as to be able to estimate the final result of the income statement.

  • Below we indicate the sections established for this 2018: 

-If The taxable Base is between €0 and €12,450, the withholding of INCOME TAX is 19%-If The taxable Base is between €12,450 and €20,200, the withholding of INCOME TAX is 24%-If The taxable Base is the €20,200 and €35,200 , the withholding of INCOME TAX is 30%-If The taxable Base is between €35,200 and €60,000, the withholding of INCOME TAX is 37%-If The taxable Base is between €60,000 and higher, the withholding of INCOME TAX is of 45%. However, in the process of obtaining the TAX withholding indicated in each case, other factors that are not economic are also taken into account. (Marital Status, number of children, etc…). In any case, they do not have to coincide with those of the 2019. On The Contrary, there are likely to be changes. E. deDUCTible EXPENSES As A freelancer under the direct estimate of INCOME TAX, you can deduct those expenses related to your professional activity. This will help you pay less tax on the Irs in the final account.

  • Requirements:

-To Be expenses related to the economic activity that you carry out as autonomous. -Be properly justified by their corresponding invoice, receipts or tickets. -Have them registered in your accounts in the books of expenses and investments.

  • Some expenses that are not considered deductible:

-Penalties or administrative and tax penalties that are the responsibility of the self-employed. -Expenses of services carried out in tax havens. Donations. -Losses whose origin is in the game. F. How To LIQUIDATe THE INCOME TAX And WHAT MODELS MUST BE PRESENTED To THE HACIENDA? As we have seen, every three months you will have to liquidate the payment to the Treasury of the INCOME TAX. You Must do so through the model 130 if you declare by direct estimation normal or simplified; or through Model 131 if you find yourself in the objective estimation regime, popularly known as “modules”. The presentation periods, for both, are the same:

  • From April 1 to 20
  • From 1 to 20 July
  • October 1 to 20.
  • From 1 to 30 January of the following year.

These can be delivered to the Tax Agency in person in an office or via telematics. And If the liquidation goes positive or to enter, the payment can be made in a bank or domiciled directly to a personal account. More Information: I Hope that with this post we have clarified several of the doubts or uncertainties that you might have on the subject. We will meet again next week with VAT. Have a good week.

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