Understanding Census Declarations, Taxes, and Business Activities
Census Declaration and Tax Implications
A census declaration serves multiple functions. For example, legal entities can apply for a Tax Identification Number (TIN) through this form. It also informs the tax office of all economic activities, affecting the Economic Activity Tax (IAE), Income Tax, Individual Income Tax, and Value Added Tax (VAT).
Personal Income Tax and Census Declaration
Estimating Yields of Trade or Business Activities
Yields can often be determined objectively by applying specific rates or modules. Income tax uses objective criteria to simplify estimating business activity yields. Companies calculate their taxable income using the mediate objective assessment method, considering signs, indices, or modules.
Companies interested in this assessment scheme should consider resigning from the direct estimation system (normal or reduced). While this simplifies registry obligations, it may lead to higher tax rates in some cases. Companies can always choose the normal direct estimation method.
New companies must decide on their preferred estimation method. If a company is in the objective assessment and wishes to change, it must declare this in the commencement of activity census statement.
Trade Tax (IAE)
Characteristics and Basic Rules
The Activities Tax (IAE) is a local tax established by the Law Regulating the Local Haciendas. Although a municipal tax, some management aspects fall under the state Hacienda. Tax rates and application instructions are governed by lower-level rules.
All taxes are subject to change as part of the normal evolution of a country’s tax system.
Key Tax Concepts
The tax on economic activities is a direct tax of a real character.
Taxable Event
The taxable event is the mere exercise of a business, professional, or artistic activity. For this tax, business activities include agricultural, livestock, forestry, fisheries, industrial, commercial, and mining services.
The following activities are not considered taxable events:
- The sale of goods for private use by a private seller, provided they have been used for over two years.
- The sale of goods received in payment for work or services.
- Isolated retail operations.
Exemptions
Exemptions include the state and agencies of public administration (state, regional, and local), public research bodies, public educational institutions, private non-profit entities, and charitable organizations like the Spanish Red Cross.
Taxable Persons
Taxable persons are natural or legal persons performing any activities that constitute the taxable event.
Tax Liability
Tax liability refers to how tax rates are applied.
Bonuses
This tax offers various subsidies for companies, varying based on economic policy needs. These typically favor cooperatives, support business start-ups in their early years (after the initial two-year exemption), and foster job creation.
Tax Period and Accrual
The tax period coincides with the calendar year, except for the year of high activity, which extends from the start date to the end of the year.
High at IAE
Taxable persons exempt from IAE do not need to register for it.
Tax Management
Tax management is conducted through the tax register. This register is compiled annually for each municipality and includes a census of activities, indicating the economic taxable contributions, minimum tax, and applicable provincial surcharges.