the autonomous groups are one of the hardest hit groups coronavirus, and the measures taken by the Government during the State of Alarm are not sufficient,with many of them being in an unsustainable situation that has led them to halt their activity until they can return to normal.
For this reason, the Council of Ministers has created a Royal Decree-Law with complementary measures for SMEs and self-employed people, in which they allow from taxation by self-employed modules to direct estimation,which means that they could start taxing in the Treasury based on their actual income,and not on the results of the previous financial year.
A measure of ‘relief’ to try to help fight the coronavirus crisis.
From AYCE Laborytax we tell you how to move from taxation by modules of freelancers to direct estimation. Notes:
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Difference between module and direct estimation
> Module estimation
The objective estimation by module is taxed on the basis of a number of indicators that will vary depending on the activity, such as hours worked, the number of workers on account, electricity consumption,.. Etc.
In this way when starting a fiscal year we will know what taxes we will have to pay to the Treasury,since the modules are calculated only once and are regularized in the Rent.
> Direct estimation
Direct estimation is the most common in freelancers,which can be of two types:
- 1. Normal estimate if the EUR 600,000 per year is exceeded,
- 2. or simplified estimate, which is the most common.
There is the option to waive simplified direct estimation and opt for normal direct, having to stay a minimum of three years with this model.
An autonomous direct estimated IRPF will vary based on profits earned,determining total income and deducting deductible expenses. From this calculation we will obtain the netyield, through which we will calculate 20% corresponding to the tax quota.
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Steps to switch from module taxation to direct estimation
If you want to go from module taxation to direct estimation during the coronavirus, you’ll need to fill out model 130 by May 20, which is IRPF’s fractional payment model for direct estimation; rather than model 131, which is intended for module taxation.
This is set out in paragraph 1B of Article 22 of the Income Tax Regulation,approved by Royal Decree 439/2007 of 30 March, which regulates the method of renunciation of the target estimation system.
It should be noted that this change in estimation will betemporary, taking up the module estimate in 2021.
Who benefits from changing module estimation to direct estimation?
This measure will be especially beneficial for self-employed people who have stopped their activity by the coronavirus pandemic,as they will become taxed on the income earned, which will undoubtedly be a relief to their accounts and a relief measure at this very difficult time.
On the contrary, those self-employed who have not been affected by the pandemicmay continue to be taxed by modules, since the change to direct estimation would force them to tax more than they currently tax.
If you are an autonomous worker and because of this coronavirus crisis you have been forced to stop your activity, you have the possibility to move from module taxation to direct estimation, so you would go on to tax based on your income.
If you still have any doubts about these two tax systems or are not too clear how to change it, please contact
AYCE Laborytax tax advisors and we
will be happy to answer any questions you may have.