Tax incentives for the hospitality and retail sectors and a new deferral of tax debts

The Official State Gazette (BOE) of December 23rd published Royal Decree-Law 35/2020, of December 22nd, which incorporates several tax measures already in effect and adopts new ones, aimed at mitigating the impact of the Coronavirus crisis on particularly vulnerable sectors, such as tourism and commerce. Among other changes, it establishes new provisions regarding debt deferrals, reductions and waivers of the simplified tax regime and the calculation of days of inactivity, deductions for business premises rental, and exemptions for company canteens and VAT on vaccines and diagnostic tests.

We inform you that in the Official State Gazette (BOE) of December 23, Royal Decree-Law 35/2020, of December 22 (with entry into force on December 24), has been published, which includes various tax measures that were already in force previously, and adopts other new ones, in order to reduce the impact of the Coronavirus crisis on particularly vulnerable sectors, such as, among others, tourism and commerce.

Regarding tax matters, the following measures are included: greater flexibility in deferring tax debts for SMEs and the self-employed; changes to the objective estimation system for Personal Income Tax and the simplified VAT system for 2020 and 2021; an exemption for in-kind benefits for company canteen services; the establishment of a tax incentive to encourage rent reductions; the deductibility of losses due to impairment of receivables resulting from potential debtor insolvencies; and a reduction in the period during which amounts owed by tenants are considered doubtful debts.

Below we summarize these measures in the tax field.

1. Deferral of tax debts

The deferral of the payment of tax debts that are in the voluntary or executive period corresponding to all those declarations-settlements and self-assessments whose deadline for presentation and payment ends from April 1 to April 30, 2021, both inclusive, is granted for 6 months, without constitution of guarantees provided that the applications are of an amount less than 30,000 euros.

This deferral will also apply to tax debts corresponding to tax obligations that must be fulfilled by the withholding agent or the person required to make payments on account, those derived from taxes that must be legally passed on and those corresponding to tax obligations that must be fulfilled by the person required to make installment payments of Corporation Tax.

To be granted the deferral, the debtor must be a person or entity with a turnover not exceeding 6,010,121.04 euros in 2020, and the conditions of the deferral are as follows:

• The deadline must be 6 months.
• No late payment interest will accrue during the first 3 months of the deferral.

2. Personal Income Tax/VAT Modules

Various measures are included that affect the calculation and deadlines for the application of modules in Income Tax and VAT.

2.1 Reduction in 2020 of the net income calculated by the objective estimation method in the IRPF and of the accrued fee for current operations of the simplified VAT regime

• The percentage is raised from 5% in general, to 20%, and up to 35% for activities linked to the tourism, hospitality and retail sectors.
• The new amount of the reduction will be taken into account to quantify the net income for the purposes of the fourth installment payment corresponding to the 2020 financial year and for the first installment payment of 2021, in the Personal Income Tax and in the calculation of the payment on account corresponding to the first quarterly installment of the 2021 financial year in the VAT.

2.2 Reduction of the number of tax periods affected by the waiver of the objective estimation method in IRPF corresponding to the 2020 and 2021 tax years.

• The legally mandated three-year waiting period for opting out of the simplified tax assessment method for personal income tax (IRPF) has been eliminated. Opting out of the simplified tax assessment method for the 2021 tax year will not prevent taxpayers from using this method again in 2022.
• For those taxpayers who waived this method in the 2020 tax year, either tacitly by submitting the corresponding quarterly payment for the first quarter of the year, or subsequently, expressly or tacitly, they are allowed to apply the objective estimation method again in the 2021 or 2022 tax years.
• The waiver and revocation provided for the objective estimation method in the IRPF will have the same effects with respect to the special VAT regimes and in the IGIC.

2.3 Impact of the states of alarm decreed in 2020 on the determination of annual income according to the objective estimation method of the IRPF and on the calculation of the accrued fee for current operations of the simplified special VAT regime in said period

The days in which the state of alarm was declared in the first half of 2020, nor those of the second half of 2020 in which, whether or not the state of alarm was declared, the effective exercise of the economic activity was suspended as a result of the measures adopted by the competent authority due to the Coronavirus, will not be counted as a period of activity in the calculation of the annual performance of the objective estimation method of the IRPF and of the accrued fee for current operations of the special simplified VAT regime.

These days are also not taken into account for the calculation of the installment payment corresponding to the fourth quarter of 2020, in accordance with the conditions established in Article 11 of Royal Decree-Law 35/2020.

2.4 Time limits for resignations and revocations

The deadline for waiving and revoking the application of the objective estimation method of the IRPF and the simplified and special regimes of agriculture, livestock and fisheries of the VAT for 2021 is extended from December 24, 2020 to January 31, 2021.

Resignations and revocations submitted for the year 2021 in December 2020 will be considered submitted within the legally valid period; however, they may be modified from December 24, 2020 to January 31, 2021.

3. Deduction for rental of premises in Personal Income Tax 2021

Effective from 1 January 2021, an Additional Provision 49 is added to the LIRPF, in relation to the deductible expenses of income from real estate capital corresponding to rentals of premises to certain entrepreneurs during the 2021 tax period, to promote rental income:

• Individuals who rent premises where certain economic activities related to the tourism, hospitality and retail sectors are carried out, and who voluntarily agree to reductions in the rental income corresponding to the months of January, February and March 2021, may include as a deductible expense for the calculation of the income from real estate capital for Personal Income Tax purposes the amount of the rent reduction agreed during those months.
• The landlord must separately report in their tax return the amount of the deductible expense referred to in the previous paragraph for this incentive, also stating the tax identification number of the tenant whose rent has been reduced.

• This deduction will not apply when the reduction in the rental income is subsequently offset by the lessee through increases in subsequent rents or other benefits, or when the lessees are a person or entity linked to the lessor within the meaning of Article 18 of the Corporate Income Tax Law or are related to the lessor by kinship ties, including spouse, in a direct or collateral line, by blood or affinity up to and including the second degree.

4. Deductibility of losses due to impairment of receivables arising from possible insolvencies of debtors in small businesses in tax periods beginning in 2020 and 2021

The required age for deducting losses due to impairment of receivables arising from the insolvency of debtors is modified for taxpayers of Corporate Income Tax, Personal Income Tax and Non-Resident Income Tax who obtain income through a permanent establishment, so that the 6 months that are required to have elapsed between the due date of the obligation and the accrual of Corporate Income Tax, are reduced to 3 months for small businesses, so that these businesses can accelerate the incorporation of such losses into the tax base in the tax periods that begin in the years 2020 and 2021.

5. Reduction of the period for amounts owed by tenants to be considered as doubtful debts

The same reduction to 3 months is established for amounts owed by tenants that are considered doubtful balances as referred to in art. 13.e) of the Personal Income Tax Regulations.

6. Company canteen exemption applicable in case of teleworking

The exemption provided for in-kind benefits derived from indirect forms of company cafeteria service also applies to remote or non-attendance work. This exemption should apply not only when the service is provided on the premises of the catering establishment, but also when the service is provided for consumption off-site, whether collected by the employee, delivered to their workplace, or, in the case of a remote or teleworking day, delivered to the location chosen by the employee for that purpose.

To this end, with retroactive effect from 1 January 2020, Article 42.3.a) of the Personal Income Tax Law (LIRPF) is amended to read as follows (Final Provision 1 of Royal Decree-Law 35/2020):

"(a) The provision of products to employees at reduced prices in company canteens or cafeterias or social service stores. Indirect methods of providing the service, provided the amount does not exceed the amount determined by regulation, will be considered as the provision of products at reduced prices in company cafeterias, regardless of whether the service is provided on the premises of the hospitality establishment or elsewhere, after collection by the employee or through delivery to their workplace or the place chosen by them to carry out their work on days when it is performed remotely or by teleworking."

7. VAT on COVID-19 vaccines and diagnostic tests

Final provision seven of Royal Decree-Law 35/2020 establishes, with effect from December 24, 2020 to December 31, 2022, the 0% VAT rate applicable to:

• Deliveries, imports and intra-community acquisitions of vaccines and in vitro diagnostic medical devices for COVID-19.
• Transportation, storage and distribution services for these products.
• These transactions will be documented on the invoice as exempt transactions.
• The application of a tax rate of 0% does not determine the limitation of the right to deduct the VAT paid by the taxable person who carries out the operation.
• During the same period, the rate of the equivalence surcharge applicable to the deliveries of the aforementioned goods will also be 0%.

See: Plan to strengthen the hospitality, retail and tourism sectors (PDF)

You can contact this professional office for any questions or clarifications you may have.

Warm regards,

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MGI Àmbit

A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.

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