Most of us tax advisors are working on the annual accounting and tax pre-closing of companies in order to be able to offer our clients the best tax advantage to reduce their tax burden for the financial year 2023.
However, in view of this workload, we cannot forget that during the month of December there is a new census obligation to comply with and to communicate any variation in the Tax on Economic Activities. This notification must be made to the Tax Agency (Form 840) or to the City Council (Form 010) where the company has its tax domicile, depending on the powers of each Administration.
Before going into the tax obligations to be filed with the Census, we would like you to familiarise yourselves with the tax to be dealt with:
The Tax on Economic Activities (hereinafter, IAE), which is regulated in articles 78 to 91 of Royal Legislative Decree 2/2004, of 5 March, which approves the revised text of the Law Regulating Local Treasuries, is a tax levied on the exercise of business, professional or artistic activities in Spanish territory.
It is a local tax that is applied at municipal level and is managed by the local councils. It is worth mentioning that not all activities are subject to IAE, and there are exemptions and bonuses applicable in many cases.
Some key points to highlight about the IAE:
– Scope of application: individuals or legal entities and the entities referred to in Article 35.4 of Law 58/2003, of 17 December, General Tax Law, which carry out business, professional or artistic activities in Spanish territory, are taxable persons subject to this tax.
However, it should be borne in mind that individuals, whether or not they are resident in Spanish territory, are exempt from the tax.
– Rates: IAE rates vary according to the nature of the activity and the net turnover. There are specific headings that classify activities, and each one has an assigned rate.
– Exemptions and allowances: There are activities that are exempt from IAE, and in some cases, local councils can establish reductions in the tax rates.
With regard to exemptions, the following two are worth mentioning:
- Taxpayers who start their activity in Spanish territory are exempt during the first two tax periods of this tax in which they carry out their activity.
- Corporate taxpayers, civil companies and the entities of article 35.4 of Law 58/2003, of 17 December, General Tax Law, are exempt provided that they have a net turnover of less than 1,000,000 Euros.
– Municipal management: Although it is a national tax, it is managed by the local councils. Each municipality establishes the specific rates and conditions, within the limits set by national legislation.
– Self-assessment: This is where the census obligation that we mentioned at the beginning of the article falls.
IAE taxpayers must submit a census declaration during the month of December (form 840 or form 010, depending on the jurisdiction of each territory) in which they notify the competent body of any event that entails, with effect for the financial year 2024, the cancellation or registration in said tax.
The following is a brief example that summarises the procedure to be carried out:
A company that is not newly created, and during the financial year 2021 had a net turnover of 750,000 Euros and during the financial year 2022 this figure increased to 1,250,000 Euros, is obliged to notify, by means of Form 840 or 010, that it no longer enjoys the exemption established in article 82.1.c) of the Royal Decree mentioned at the beginning of the article, with effect for the financial year 2024. This census notification must be made in December 2023.
The range of possibilities for this tax is very wide depending on the type of each client and the activity to be carried out, so if you would like further information on this article, we remain at your disposal to clarify any doubts you may have in this respect.