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Practical manual for Income Tax 2020.

Practical Case

Special category bar (IAE heading: 673.1), located in rented premises in the city of Salamanca, where since its opening in 1995, 3 full-time salaried employees have worked with the owner according to the Collective Agreement of the sector, which sets a working day of 1,800 hours per year. The owner does not carry out any other economic activity.

In the previous year (2019), the number of units of the "salaried personnel" module amounted to 3 people.

In 2020, as a result of the health emergency situation caused by the Covid-19 coronavirus and the various measures adopted in response to this situation, the data to be taken into account are the following.

  1. Economic activity has been suspended during the declaration of the state of emergency from March 14 to June 20, 2020 and from November 4 to December 5, 2020, a period in which the closure of the hospitality industry was decreed by the competent authority.
  2. Due to the closure of the bar during the declaration of the state of alarm, the owner requested and obtained the extraordinary benefit for cessation of activity for an amount of 1,400 euros

  3. As regards its three employees, in accordance with Royal Decree-Law 8/2020, of March 17, it requested and was granted an ERTE due to force majeure for suspension of employment contracts, which took effect from March 14, 2020. Subsequently, on July 1, one of the workers was reinstated, with the other two continuing in ERTE until December 31, 2020.

    The owner cannot set the exact hours worked, so the number of hours not worked must be calculated for each worker, taking into account their situation in the ERTE and the days in which the state of alarm was declared in the first half of 2020, as well as the days in the second half of 2020 in which the exercise of the activity was suspended by the competent authorities of the Community of Castilla y León.

  4. The bar is 10 metres long and has 8 tables for four people.

  5. Of the fixed assets assigned to the activity, the owner only keeps invoices for the coffee machine, a thermal display case, the air conditioning installation and the 8 tables with their chairs. The data contained in your investment assets register are as follows:

    ElementBeginning of useCost priceAccumulated amortization as of 31-12-2019
    Furniture (tables and chairs) 01-06-2015 1,500 euros 1,500 euros
    Coffee maker 01-06-2016 9,400 euros 8,400 euros
    Thermal display case 01-07-2017 4,000 euros 2,500 euros
    Air conditioner installation 01-08-2017 6,600 euros 3.900 euros

  6. To replace the establishment's tables and chairs, the owner purchased 8 new tables and 32 chairs on February 1, 2020 for 2,400.00 euros, without the unit value of any of said pieces of furniture exceeding the amount of 601.01 euros.

    The furniture was installed in the bar on the 15th of the aforementioned month. He sold the old furniture for 510.00 euros.

  7. On August 10, 2020, a flood occurred in the bar, causing damages whose repair amounted to 1,200.00 euros, without the owner's insurance policy covering the aforementioned risk. On September 1, the owner of the activity submitted a document to the Tax Agency corresponding to his tax domicile, reporting the aforementioned facts and providing an invoice for the repairs carried out along with the document proving the flooding issued by the local fire service. The competent services of the Tax Agency Administration have verified the certainty of the cause that motivated the extraordinary expense and its amount.
  8. The taxpayer has not obtained other income in the year.

Solution

Phase 1: Determination of prior net performance.

1. Determination of the number of computable units of each of the modules applicable to activity .

Module 1. Salaried staff

Note: For the quantification of the modules “salaried personnel” and “non-salaried personnel”, the hours corresponding to the days in which the state of alarm was declared in the first half of 2020 will not be counted as worked, as well as the days in the second half of 2020 in which, whether or not the state of alarm was declared, the effective exercise of economic activity would have been suspended as a result of the measures adopted by the competent authority to correct the evolution of the epidemiological situation derived from Covid-19 (also known as SARS-CoV-2).

  • Worker 1:

    ERTE: from 03/14/2020 to 06/30/2020 = 109 days

    Closing of the activity: from 11/04/2020 to 12/04/2020 = 31 days

    Total (109 + 31) = 140 days

    Number of hours not worked in that period (140 days ÷ 366 days) x 1,800 hours/year = 688

    Computable hours worked: 1,800 hours/year – 688 hours not worked = 1,111 hours

  • Workers 2 and 3

    ERTE: from 03/14/2020 to 12/31/2020 = 293 days

    Number of hours not worked in that period: (293 days ÷ 366 days) x 1,800 hours/year = 1,441 hours

    Hours worked: 1,800 hours/year – 1,441 hours not worked = 359 hours each of the two workers

    Total: 2 workers x 359 hours = 718 hours

  • Total hours (1,111 + 718) = 1,829 computable hours/year.

  • Calculation of number of units for the "salaried personnel" module (average): 1,829 hours worked ÷ 1,800 hours/year = 1.01

Module 2. Non-salaried staff: The owner

Note: The declaration of a state of emergency to address the health emergency situation caused by the Covid-19 coronavirus carried out by Royal Decree 463/2020, of March 14, covered, with its successive extensions, from March 14 until 00:00 hours on June 21, 2020. Therefore, the number of days in which the state of alarm was declared in the first half of 2020 was 99 days.

  • Non-computable days:

    State of alarm: from 03/14/2020 to 06/20/2020 = 99 days

    Closing of the activity: from 11/04/2020 to 12/04/2020 = 31 days

    Total days without activity (99 + 31) = 130 days

    Hours not worked (130÷ 366) x 1,800 hours/year = 639 hours

  • Hours worked: (1,800 – 639) = 1,161

  • Calculation of number of units for the "non-salaried personnel" module (average):  1,161 hours worked ÷ 1,800 hours/year = 0.64

Module 3. Electrical power . Contracted kilowatts: 35.00 kW/hour

  • Non-computable days:

    State of alarm: from 03/14/2020 to 06/20/2020 = 99 days

    Closing of the activity: from 11/04/2020 to 12/04/2020 = 31 days

    Total days without activity (99 + 31) = 130 days

  • Computable days: (366 – 130) = 236 days

  • Average: 35 KW/hour × (236 days ÷ 366 days) = 22.57 kw/hour

Module 4. Tables . Tables for 4 people: 8 tables

  • Non-computable days:

    State of alarm: from 03/14/2020 to 06/20/2020 = 99 days

    Closing of the activity: from 11/04/2020 to 12/04/2020 = 31 days

    Total days without activity (99 + 31) = 130 days

  • Computable days: (366 – 130) = 236 days

  • Average: 8 tables × (236 days ÷ 366 days) = 5.15 tables

Module 5 . Bar length. Linear meters: 10.00 ml

  • Non-computable days:

    State of alarm: from 03/14/2020 to 06/20/2020 = 99 days

    Closing of the activity: from 11/04/2020 to 12/04/2020 = 31 days

    Total days without activity (99 + 31) = 130 days

  • Computable days: (366 – 130) = 236 days

  • Average: 10 × (236 days ÷ 366 days) = 6.45 ml

Module 7. Type "B" recreational machines.

  • Non-computable days:

    State of alarm: from 03/14/2020 to 06/20/2020 = 99 days

    Closing of the activity: from 11/04/2020 to 12/04/2020 = 31 days

    Total days without activity (99 + 31) = 130 days

  • Computable days: (366 – 130) = 236 days

  • Number of installed machines: 1.00 machine

  • Average: 1 machine × (236 days ÷ 366 days) = 0.65

2. Application to the number of units of each module of the annual performance per unit before amortization established in Order HAC /1164/2019, of November 22 (BOE of the 30th).

ModuleNo. of unitsYield per unitPerformance per module
1. Salaried staff 1.01 4.056,30 4.096,86
2. Non-salaried Staff 0.64 15,538.66 9,944.74
3. Electrical power 22.57 321.23 7.250.16
4. Tables 5.15 233.04 1,200.16
5. Bar length 6.45 371.62 2,396.95
6. Type "A" machines 0.00 957.39 0.00
7. Type "B" machines 0.65 2.903,66 1,887.38
Previous net performance (sum) 26,776.25
Phase 2: Determination of reduced net income.

1. Minority for employment incentives .

  1. Minority coefficient due to increase in the number of salaried people .

    The workforce has not been increased compared to that existing in 2019, so this coefficient does not apply.

  2. Reduction coefficient by sections of the number of units of the "salaried personnel" module.

    The coefficient by sections is applied to 1.01 units of the module as follows:

    Up to 1.00: 1.00 x 0.10 = 0.10

    Between 1.01 and 1.01: 0

    Reduction coefficient by sections (0.10 + 0.00): 0.10

  3. Reduction coefficient for employment incentives.

    It is the result of adding the reduction coefficients by increase in the number of salaried people and by sections of the number of units of the "salaried personnel" module: 0 + 0.10 = 0.10

  4. Amount of the reduction for employment incentives.

    It is the result of multiplying the reduction coefficient by the annual performance per unit of the "salaried personnel" module: 0.10 x 4,056.30 = 405.63 euros.

2. Minority due to investment incentives .

Using the amortization table contained in Order HAC/1164/2019, of November 22 (BOE of the 30th), and applying the maximum linear amortization coefficients set therein, the amount of the reduction for investment incentives is determined as follows:

Minority due to investment incentives (sum) 6.050

Note to the table:

(1) The input VAT is not included in the acquisition value of the fixed assets, since the activity is subject to the simplified VAT regime. (Back)

(2) Despite having been in operation in the company until its closure due to sale, the old tables and chairs cannot be depreciated in 2020, since as of 31-12-2019 these items had already been fully depreciated. (Back)

(3) Since the amount resulting from the application of the maximum coefficient is higher than the amount pending amortization as of 31-12-2019, which amounts to 1,000 euros (acquisition value 9,400 - Accumulated amortization 8,400), the amortization has been carried out for this last amount. (Back)

(4) New tables and chairs can be freely depreciated because their unit value is less than 601.01 euros and because, in addition, the total amount of the new assets acquired in 2020 does not exceed the amount of 3,005.06 euros. (Back)
Heritage elementValue acquisition(1)Maximum coefficientAmortizable periodAmortization
Furniture (tables and chairs) 1,500 --- --- --- (2)
Coffee maker 9.400 25% All year 1,000(3)
Thermal display case 4.000 25% All year 1,000
Air-conditioning 6.600 25% All year 1,650
New tables and chairs (freely amortized) 2,400 100%(4) Irrelevant 2,400

3. Determination of reduced net income

Previous net performance: 26,776.25

less: Reduction for employment incentives: 405.63

less: Minority due to investment incentives: 6.050,00

equal to: Reduced net income (26,776.25 – 405.63 – 6,050) = 20,320.62

Phase 3: Determination of net module yield.

No correction index is applicable

Phase 4: Determination of the net return of the activity.

Note: The extraordinary benefit for cessation of activity is considered work performance and therefore does not count as income from economic activity.

Note: In accordance with the provisions of Article 9 of the Royal Decree-Law on urgent measures to support the tourism, hospitality and commerce sectors, it is appropriate to apply, first of all, the general reduction of 35% since this is a hospitality activity. Furthermore, since all the requirements established for this purpose have been met, the amount of the extraordinary expenses caused by the flood that occurred on August 10 must be deducted.

Net module yield = 20,320.62

less: General reduction (35% s/ 20,320.62) = 7,112.22

less: Extraordinary expenses due to exceptional circumstances: 1,200

equal to: Net income from the activity (20,320.62 – 7,112.21 - 1,200) = 12,008.40

Phase 5: Determination of the reduced net return of the activity.

  1. Reduction for irregularity

    Since there are no returns with a generation period greater than two years or which are considered to be obtained in a notoriously irregular manner over time, the reduced net return from the activity coincides with that determined in phase 4 above, which amounts to 12,008.40 euros.

    Comment : Capital gains or losses obtained as a result of the transfer of assets related to the activity (chairs and tables) must be declared in section F2 of the declaration.

  2. Reduction for the exercise of certain economic activities

    Since the income from economic activity exceeds 12,000 euros, the reduction in article 32.2.3 does not apply. of the Personal Income Tax Law.

Determination of the total reduced net income of the activity.

The total reduced net income matches the total reduced net income of the activity = 12,008.40