Self-employed individuals may apply the start-of-activity reduction for two years

The application of the start-of-activity reduction in Personal Income Tax (IRPF) is a tax benefit designed to incentivize the launch of new economic ventures. Recently, the Dirección General de Tributos (DGT) has clarified the conditions under which this benefit can be extended beyond the first tax year.

What the DGT has ruled

The inquiry focused on determining whether a taxpayer could benefit from the start-of-activity reduction in the second year of their venture. The DGT's criteria establish that the fundamental requirement is not to have carried out any economic activity in the year immediately preceding the start of the new activity.

If this precept is met and the net income obtained in the first period is positive, the 20% reduction on said income can also be applied in the following tax period. In practical terms, if an activity begins in 2024 without any economic activity existing in 2023, the taxpayer can apply the reduction in both the 2024 and 2025 tax returns, provided that the other legal requirements established in current regulations are maintained.

What this means for you

This criterion has a direct impact on self-employed workers who restart their professional career after a period of inactivity. If you have ceased performing economic activities during the year prior to the start of your current project, you have the possibility of optimizing your tax burden for two consecutive fiscal years.

It is important to highlight that the reduction is not automatic simply by starting, but rather depends on the non-existence of previous economic activity and the obtaining of positive net income in the first fiscal year. The reference regulation for this treatment is Law 35/2006 on IRPF.

What you should do

To ensure the correct application of this benefit, it is necessary to verify that no economic activity was recorded in the fiscal year immediately preceding the start of the new venture. It is recommended to document the previous period of inactivity to prove compliance with the requirement before the Tax Administration. Each particular situation must be analyzed to confirm that all requirements demanded by the IRPF Law and the General Tax Law are met.