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V3147-18 11 December 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · prestación por desempleo

Loss of exemption for lump-sum unemployment benefit when transitioning from sole trader to company

A sole trader who applied for the exemption to receive unemployment benefits as a lump sum has enquired whether they can form a company with another partner for the same business activity. The Directorate General for Taxes (DGT) has ruled that transitioning from a sole trader to a company breaks the requirement to maintain the same business activity.

The question raised

Impact, on the exemption established in Article 7.n) of the Personal Income Tax Law, of the circumstance of transitioning from operating as an individual entrepreneur to incorporating a company with another partner to carry out the same activity.

The DGT's ruling

The exemption of lump-sum unemployment benefits requires the maintenance of activity for five years in the case of the self-employed worker. The transition from performing an economic activity as a self-employed individual to incorporating a company with another partner to carry out the same activity would break the right to the exemption.

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