The tax authorities estimate a total collection loss of about 120 million euros when a 5% discount is applied to income tax calculations for self-employed individuals and the simplified special VAT regime. This affects roughly 350,000 freelancers and professionals, excluding those in agricultural activities. If the ministerial decision is published as expected, an additional 5% reduction will be realized in 2024 compared to 2023, rather than the 10% reduction seen in 2023.
The loss in revenue is included in the draft ministerial decree, and the public comment period recently closed. Overall reductions have been cut in half from 10% in 2023 and 15% in 2022, a policy previously justified to mitigate COVID-19 impacts. The 5% reduction signals the withdrawal of a measure that had been in place since 2009.
Presently, about 350,000 self-employed workers and professionals use this income calculation system to determine personal income tax payments. These activities typically involve substantial cash dealings, which can complicate revenue reporting for the Tax Office. The method calculates the tax due based on predetermined parameters, rather than solely on actual sales, by comparing income and expenses across various businesses and economic activities. The module system has operated for seven years as part of a transition process with an ultimate goal of phasing it out.
border maintenance
To keep using this method, the existing limits are expected to stay in place: the income threshold remains at 250,000 euros in 2023 for self-employed individuals selling directly to consumers, and 125,000 euros for those invoicing companies.
Tax Office calculations show that 58.9 million of the total 120 million euro loss would fall on the state, with 60.1 million allocated to autonomous communities and 1.2 million to local authorities under the current regional financing framework.
In agricultural activities, a separate method covers around 800,000 taxpayers based on the latest 2021 data. A 35% reduction in the agricultural diesel purchase price is planned for 2024, alongside a 15% cut in fertilizer costs. These adjustments will be applied to net returns calculated under the objective estimation method for personal income tax, as necessary for supporting farming and livestock activities.
The revenue impact for agriculture totals 68.8 million euros, with 36.7 million euros allocated to diesel purchase discounts and 32.1 million euros to fertilizer discounts.
The draft order also introduces other measures with smaller tax collection effects, such as a 20% reduction in net income calculated under the objective estimation method for self-employed individuals and those filing under the module system. Certain regions and events, including the effects of the volcanic eruption on palm island and historical economic activity in Murcia’s Lorca, are noted in relation to these adjustments.