Yes, it is the IRC we are talking about and not the IRS. There is also a simplified regime for IRC taxpayers.
Within the scope of the IRC Reform carried out until 2014, this new regulation was instituted. As the name suggests, it will be a regime that determines the tax in a simpler or less complex way. Let us then see the provisions of articles 86ºA and 86ºB of the Corporate Income Tax Code.
The Simplified Regime may be a possibility for resident taxable persons, not exempt or subject to a special taxation regime, who carry out a commercial, industrial or agricultural activity as their main activity.
In addition to this, it is also necessary that:
- -have not earned, in the immediately preceding year, a gross annual income not exceeding €200,000.00;
-do not have a balance sheet total of more than €500,000.00 in the previous year; - are not legally obliged to perform a statutory audit;
- no more than 20% of its share capital is held, directly or indirectly, by entities that do not fulfill any of the conditions set out in the previous paragraphs, except when they are venture capital companies or venture capital investors;
- -adopt the accounting normalization regime for micro-entities;
- have not renounced application of the regime in the previous three years, with reference to the date on which application of the regime begins.
Fulfilling the requirements, the option for the Simplified IRC Regime can be made in the declaration of commencement of activity or in a declaration of amendments to be delivered by the end of February of the year in which the regime is intended to be applied.
And what is the big difference when it comes to calculating the tax?
The regulations determine that the taxable amount (base value for the application of the tax rate) is defined by applying the following coefficients:
– 0.04 of sales of goods and products, as well as services provided within the scope of catering and beverage activities and hotel and similar activities, with the exception of those carried out within the scope of the activity of operating local accommodation establishments in the form of housing or apartment;
– 0.75 of the income from professional activities specifically provided for in the table referred to in article 151 of the IRS Code;
– 0.10 of the remaining income from the provision of services and subsidies intended for exploration;
– 0.30 of non-exploitation subsidies;
– 0.95 of income from contracts whose object is the assignment or temporary use of intellectual or industrial property or the provision of information regarding experience gained in the industrial, commercial or scientific sector, other capital income, positive result property income, the positive balance of capital gains and losses and other equity increments;
– 1.00 of the acquisition value of equity increments obtained free of charge;
– 0.50 of income from operating local accommodation establishments in the form of a house or apartment, located in a containment area;
– 0.35 of income from operating local accommodation establishments in the form of a house or apartment located outside the containment areas.
However, the taxable amount determined in these terms cannot be less than 60% of the annual value of the guaranteed minimum monthly remuneration. Thus, for the 2020 tax period this amount is €5,334.00 (635.00 X 14 X 60%). On the first €25,000.00 of taxable income, a corporate income tax rate of 17% is applicable, with a rate of 21% being applied to the surplus, in the period of 2020. However, in the case of the coefficient of 0.04 (sales) and 0.10 ( other services rendered and operating subsidies), the minimum taxable amount is reduced by 50% (to €2,667.00) in the first year of activity and by 25% (to €4,000.50) in the second year.
This form of calculation can have “ifs” and “buts”, namely because the application of the coefficients to the various incomes results in the value of the tax base, so that the tax losses that have been calculated in tax periods prior to the application of this regime do not may under these circumstances be deducted. Although, in the event of termination of the simplified regime, the taxable person may deduct the tax losses that are still within the reporting period.
On the other hand, taxable persons who opt for the simplified regime are exempt from paying the municipal surcharge, since this is levied on taxable income, a concept that ends up not existing in this context since, in this case, taxable persons only proceed with the determination of the collectable matter.
Also in this context, the issue of autonomous taxation must be highlighted. It so happens that taxable persons who fall under this regime are exempt from paying autonomous taxation on costs with and representation, allowances, among others.
It should also be noted that the possibility of deducting amounts related to tax benefits, such as the RFAI or the DLRR, is also prohibited.
Shall we go to a practical case to clarify?
A commercial company that started its activity in 2020 obtained a turnover of €100,000 for the year 2020 resulting from the sale of goods.
Calculated taxable amount:
€100,000.00 * 4% = €4,000.00
Minimum collectable amount:
6351460% = €5,334.00 * 50% = €2,667.00
Collection: €4,000 * 17% = €680.00 – IRC PAYABLE for the year 2020