The reduction for starting an activity only applies to the first activity of the tax year

Starting an economic activity brings specific tax benefits, most notably the reduction for starting an activity in Personal Income Tax (IRPF). However, the application of this benefit is subject to temporal and exclusivity conditions within the same fiscal year.

What the DGT has ruled

The Directorate General of Taxes (DGT) has determined that the reduction for starting an activity applies exclusively to the net returns of the first economic activity started in the year, provided that the taxpayer has not carried out any economic activity in the previous tax year.

The criteria establish that if a taxpayer starts an activity with positive returns and subsequently ceases said activity to begin a new one within the same fiscal year, the second activity will not be entitled to the reduction. Consequently, the tax benefit can only be applied to the positive net return derived from the first activity started.

What this means for you

If you are an individual carrying out economic activities under the direct estimation method, you must take into account that this benefit cannot be accumulated for multiple projects started in the same year. The tax system seeks to incentivize the first step toward economic activity, but it does not allow for fragmenting the tax year to apply the reduction on different occasions.

This scenario directly affects those who decide to change sectors or business models halfway through the year. If the first activity has already generated returns and has exhausted the possibility of applying the reduction, any subsequent activity started in that same fiscal period will be excluded from this benefit.

What is advisable to do

It is necessary to analyze the planning of economic activities before proceeding with their registration in the census of entrepreneurs. In the event that multiple starts of activity or changes in business models are foreseen during the year, it must be considered that the 20% reduction will only be effective on the first project that generates positive net returns.

Each situation of starting an activity must be assessed individually to determine whether the requirements of not having carried out activity in the previous year are met and to identify which activity will effectively allow the application of the reduction in accordance with the IRPF Law.