If you are self-employed, you must know at the time of closing the year that you have the possibility of applying the same tax incentives as small businesses.
In the case that you carry out your activity as an individual natural provided you generate a turn-over under 10 million euros, you have the quality of a “small business” recognized, and so you can enjoy in your Income Tax the incentives applicable to the Corporate Tax such as:
- a) Freedom of depreciation and accelerated depreciation.
In general, all tangible assets (except land) , fixed or moveable, that are owned by you as entrepreneurial and used in trade or business are depreciable if their useful life exceeds a tax year. Depreciation rates are fixed by law and the rates vary depending on the type of industry and the asset. To be deductible the depreciation amount must be recorded in the accounting books and must be “effective”, that means, it must correspond to the actual depreciation of the asset
That is applicable for entrepreneurial and so if in 2018 you acquired a new asset and also increased your workforce or number of employees , you can depreciate that asset in an accelerated manner freely. For this, it is necessary that the increase in workforce is maintained at least in the following two years. As for accelerated depreciation, you also have the right to amortise your new assets according to the percentage that results from multiplying by 2 the maximum coefficient established in approved so called “tables” or depreciation schedules (straight-line rates):
- b) Deterioration. Likewise, even if in 2018 there were no unpaid clients, 1% of the client balance may be deducted as expense as of December 31.
- c) Deduction. Finally, in case you have acquired a new asset you can apply a deduction in the quota in your income tax return up to 5% of said investment. This is specifically for entrepreneurial but not for companies.
These incentives are often ignored by the self-employed but can be traduced in substantial savings on your invoice with the Tax Authorities.
Carlos Espinosa – Solicitor & Tax Adviser
+34 627 41 32 01