The special tax regime for small companies is designed to provide several benefits to small businesses. This is a framework that entrepreneurs, SMEs and self-employed professionals must know to be able to take advantage of it by fulfilling the necessary requirements.
What is fiscally a small company and its exceptions
Small companies are those entities whose net amount of turnover has been less than 10 million Euros in the previous tax period. Although the general rule is this, there are several exceptions to take into account:
- Patrimonial entities cannot enjoy this special regime.
- If a natural person develops several economic activities, the limit refers to the set of activities.
- In newly created entities, the amount will refer to the first tax period – prorated to the days in which it has exercised the activity-.
- If the entity is part of a group of companies, the limit refers to the group as whole.
- This limit is applied jointly to entities controlled by the same person or their relatives.
Fiscal incentives of the special tax regime of small companies
Below we summarize what exactly these benefits are.
Freedom to amortize for investments that generate employment
New items of fixed assets and real estate investments related to economic activities may be amortized freely as long as the average employment increases over the previous 12 months and the following 24 months are maintained. This increase will have to occur during the 24 months following the date of the beginning of the tax period in which the acquired goods come into operation. It can be freely amortized up to the limit of the result of multiply 120.000 Euros by the increase in occupancy.
Freedom to amortize for investments of low value
New items of material fixed assets subject to economic activities not exceeding 300 Euros each may be amortized freely. The limit is 25.000 Euros during the tax period.
Although no employment is created, tangible fixed assets and real estate investments enjoy accelerated amortization. They can be amortized according to the coefficient that results from multiplying it by 2 according to tables. Unlike the freedom of amortization, the benefit of accelerated amortization can also be enjoyed with the amortization of intangible assets.
Losses due to credit deterioration
Small companies can deduct up to 1% of the balance of debtors at the end of the year. The percentage is considered of the total of debtors less those that individually have covered the insolvency risk and the debtors that are not deductible.
Reserve of tax base levelling
If a year has a positive tax base, the tax base can be reduced by 10%. In the event that in the 5 subsequent years the entity has negative tax bases, what is not declared due to the levelling reserve will reduce the negative amount of the base. If no negative taxable income has been reduced in 5 years, the base will increase after that period.
The requirement of this advantage of the special tax regime of small companies is that part of the result of the exercise should be used to endow a restricted reserve.
Amortization of assets object of reinvestment
The tangible fixed assets and real estate investments affected as economic activities in which the reinvestment materializes may be amortized based on the coefficient resulting from multiplying by three the maximum linear amortization coefficient provided in tables.
In relation to the assets acquired under the special financial leasing tax regime, in addition to the financial costs itself, the part of the instalments corresponding to the recovery of the cost of goods is considered a deductible expense with the limit of applying the cost of these triple the depreciation coefficient according to tables. The excess will be deductible in the successive tax periods, respecting the same limit.
For the tax periods started from 1-1-2016, small companies apply the general tax rate, regardless of the amount of their tax base.
To learn more about how to take advantage of all the benefits offered by the special tax regime of small companies, contact us. We will analyze your case in a personalized and detailed way.