Inability to apply the start-of-activity reduction if opting for objective estimation

The Directorate General of Taxes (DGT) has issued a relevant ruling for individuals starting an economic activity who seek to optimize their tax burden through the reduction provided for in the IRPF regulations.

What the DGT has resolved

The inquiry focused on the possibility of applying the 20% reduction on positive net income during the tax period in which the activity begins. The DGT has determined that, to access this benefit, it is an indispensable requirement that the income be determined using the direct estimation method in the tax period in which the activity is initiated.

The body clarifies that if a taxpayer opts for the objective estimation method during the first year of their activity, they lose the right to apply said reduction. This impediment persists even if, in the following fiscal year, the taxpayer decides to change their taxation regime to direct estimation.

What this means for you

If you are a professional or self-employed individual about to start an economic activity, you must consider the method for calculating your income from the very beginning. Choosing the objective estimation regime (modules) in the opening year definitively blocks the application of the 20% reduction on positive net income for that start of activity.

This criterion directly affects the tax planning of individuals, as the reduction for starting an activity is strictly conditioned on the taxation regime applied in the opening year, as established in the IRPF Law.

What is advisable to do

Before formalizing the start of an economic activity, it is necessary to analyze which calculation method proves most beneficial in the long term. The decision to pay taxes via objective estimation in the first year has an immediate tax consequence: the waiver of the reduction for starting an activity.

Given that every financial situation is different, it is recommended to assess the cost structure and income forecasts to determine if direct estimation, which allows access to this benefit, is the most suitable option for your particular case.