Direct estimation method for economic activities

• Activity not excluded from the objective estimation method.
• Previous year's turnover ≤ €600,000 (summing all of the taxpayer's activities).
• None of the taxpayer's activities is under the normal method.
• In the first year of activity, simplified applies unless expressly waived.

If the activity started in 2024, the turnover is annualised to assess whether it exceeds €600,000.

• The waiver must be submitted in December of the previous year (Form 036/037). It has a minimum effect of 3 years.
• Exclusion occurs automatically if turnover exceeds €600,000; it takes effect from the following year.
• After waiver or exclusion, the normal method applies for a minimum of 3 years.

If any of the taxpayer's activities is under the normal method, all other activities must also be determined under the normal method. The incompatibility does not take effect in the year a new activity starts under the normal method — only from the following year onwards.

All activity income is included:

• Sales of products and provision of services
• Changes in inventories (when inventories increase at year end, this is recognised as income)
• Subsidies linked to the price of units sold
• Own use (goods or services from the activity used for personal purposes or donated free of charge)

Not included: output VAT, equivalence surcharges nor special agricultural, livestock and fishing regime VAT compensations (unless the taxpayer is subject to those regimes, in which case they do count).

For an expense to be deductible it must be correlated with the activity's income, recorded in the books and justifiable.

1. Operating expenses

• Inventory purchases (merchandise, raw materials): acquisition price, including transport, insurance and other costs to make the goods available for sale. Deductible VAT is not part of the price.
• Changes in inventories (only when decreasing): opening inventories > closing inventories.
• Other consumables: incorporated elements, fuel, spare parts, office supplies.

2. Staff costs

• Wages and salaries of employees: gross amount accrued (including benefits in kind).
• Employer Social Security contributions.
• Redundancy payments (even if exempt for the employee).
• Staff allowances (even if exempt for the recipient).
• Pension plan contributions and employees' social security systems: deductible when attributed to the employee.

Remuneration paid to the spouse or minor children who regularly work in the activity is deductible provided there is an employment contract, Social Security registration and the remuneration does not exceed market rates. Any excess is not deductible. These payments are taxed as earned income for the recipients.

3. Leases and royalties

Rents on premises, machinery, equipment and licence fees.

4. Independent professional services

Fees of lawyers, auditors, notaries, consultants and similar.

5. Other external services

Advertising, insurance, supplies, communications, repairs and maintenance.

Client or supplier entertainment expenses are deductible up to a limit of 1% of the net turnover.

6. Fiscally deductible taxes

IBI (property tax), IAE (business activity tax) and other local taxes. Not deductible: criminal or administrative fines and penalties, or enforcement period surcharges.

7. Financial expenses

Interest on loans connected with the activity.

8. Depreciation

Depreciation is one of the most significant expenses for the self-employed. Amounts reflecting the effective impairment of tangible and intangible fixed assets are deductible.

Depreciation methods:

Most common maximum straight-line coefficients (Corporate Income Tax tables):

For business owners who do not keep commercial accounting (professionals and simplified businesses), depreciation is recorded in the investment assets register.

9. Credit impairment losses (bad debts)

Credit losses are deductible when:

• 6 months have elapsed since the due date without payment, or
• The debtor has been declared insolvent in insolvency proceedings.

For small companies (turnover < €10 million), a global impairment loss of 1% of the debtor balance at year end may also be deducted (with certain exclusions).

10. Deductible provisions

• Normal method: Corporate Income Tax provisions (implicit obligations, onerous contract costs, sales returns, equity-instrument-based remuneration).
• Simplified method: instead of individual provisions, 5% of positive net income (difference between income and expenses excluding this item) is applied. Limit: €2,000 per taxpayer.

Non-deductible expenses

• The maximum straight-line depreciation coefficient is multiplied by 2 for all new assets.
• For investments in new assets that create jobs, free depreciation may apply.

For small companies, intangibles without a defined useful life (goodwill) are depreciated at a maximum of 150% of the table coefficient.

Articles 2 and 4 of Order PJC/178/2025, of February 25 (BOE of February 26), which develops the legal rules for Social Security contributions for 2025, set the following parameters:

Contributions exceeding €16,672.66 are not lost: the excess may reduce the general taxable base of PIT, but only in the part covering the same contingencies as pension plans and within the general limits for contributions to social welfare systems. See base-liquidable → Reductions for contributions to social welfare systems.

There is no specific start-of-activity reduction under direct estimation. However, in the first year in which net income is positive and the following year, a 20% reduction applies on that positive net income if the activity began before that period.

If the activity's net income is generated over a period exceeding 2 years or is obtained in a notably irregular manner, a 30% reduction applies.

Limit: The maximum base to which the 30% applies is €300,000.

Self-employed persons with net economic activity income below €19,747.50 and income other than activity income not exceeding €6,500 may apply an additional reduction (equivalent to that for employees).

This reduction is incompatible with the 5% provisions and hard-to-justify expenses of the simplified method.