Tax Updates for 2021 and How to Declare Losses

After thoroughly discussing this year's tax calendar for SMEs and freelancers, we believe there are important tax-related issues we have yet to address that are worth knowing. In this article, we will discuss the most significant tax updates as well as changes in taxation. Additionally, we will detail what should be done when filing returns in case of losses.

The most important tax-related updates can be summarized as follows:

1. New plastic tax. As of July, the use and sale of disposable plastic products will be prohibited, in addition to taxing their manufacture. The waste law draft will require many companies to adapt their activities to the new measure, especially in the hospitality sector.
2. VAT on sugary and sweetened beverages increases to 21%, although it remains at 10% for bars and restaurants.
3. The limits of the module system will be maintained: The Government will maintain the module system limits for another year, affecting 650,000 freelancers.
4. Aids for nurseries: Mothers, both employees and freelancers, who take their child to a freelancer's nursery will be able to access a new deduction. They can deduct up to €1000 from their personal income tax payment for expenses on nurseries or childcare centers for each child under three years old.
5. Vehicle registration tax increases: The acquisition cost of a vehicle increases by 5% due to the new CO2 emissions measurement system. This will result in a price increase of €800 – €1000 for the car, affecting both buyers and dealerships.
6. The Google Tax: The Tax on Certain Digital Services, better known as the Google Tax, is already in force. It taxes large tech companies with 3% of their revenue from advertising, online intermediation, and data transmission. This affects any organization that uses these platforms, as it will be more expensive to use their services.

Updates on contributions

1. The self-employed fee increases again, ranging from €3 to €12 more. The increase in contribution rates from January is 0.1% for cessation of activity, and self-employed individuals will pay 0.3% more in their contributions from this month onwards. The minimum fee increases to €289 per month, and the maximum fee becomes €1,233.2.
2. The fee for self-employed partners: The minimum base remains set at €1,214.10 per month. Therefore, the increase in the fee for self-employed partners implies a payment of €371.51 per month.
3. Changes in self-employed retirement. Pensions increase, and some requirements to access retirement are modified:
   • Self-employed pensions increase by an average of €81 this year.
   • Retirement is at 66 years with less than 37 contributions.
   • Changes in pension calculation: modification of the regulatory base.
   • Extension of the calculation period for benefits from 23 to 24 years.
   • The age to access early retirement increases: having at least 64 years and proving a minimum contribution period of 35 years, 15 of them prior to retirement.

If you don't want to miss any news about tax regulations, you can't lose sight of the start-up Declarando. This online platform, which offers tax advisory services to freelancers, will also publish quarterly reports detailing the new regulations that affect them.

What happens with taxes if I had losses?

Freelancers leave behind a year marked by restrictions, lack of customers, and, in many cases, inactivity. Regardless of what they have billed, the exceptional situation experienced in these months has not modified the tax calendar or the obligations of the freelancer with the Administration, despite suffering income losses exceeding 60%.

VAT remains the same: Form 303 will be filed even if there was no activity. Otherwise, the minimum fine is €150.

• The volume of activity.
• If there have been no income or expenses.
• If expenses have been maintained but no income has been obtained.

In the case of quarterly VAT, there are two options, which must be carefully chosen as they completely change the result of the settlement.

• Declare that there has been no activity.
• Declare that no income has been received.

VAT without income or expenses

This situation occurs when there has been no activity but the registration in the RETA (requirement to access benefits) was maintained. In this case, only the "no activity" box will be checked. It occurs in cases of freelancers or private tutors who work from home and have no fixed expenses to deduct.

VAT without income but with expenses

This situation is the most common during the pandemic, as businesses such as shops and hospitality have not received income but have had to face expenses. In these cases, Form 303 must be completed, filling in only the expenses section, to be able to deduct VAT normally – obviously, the result will be negative.

Negative VAT results will be offset in subsequent returns. If the result remains negative in the last year of the tax period, a refund can be requested or the negative balance can be offset in the returns of the following years.

The same applies to Form 130 and Form 100 of personal income tax: it is also mandatory to file them even if there are losses. You just have to fill out the declaration and check the negative result box.

Corporate tax: the exception

When there are losses, it is necessary to differentiate between individuals and legal entities. The former will not see changes in the usual taxes regardless of their billing, but there are exceptions with corporations. Form 202 of corporate tax is mandatory if they have a volume of operations from the previous year exceeding €6,010,121.04, whether they have made a profit or not. If they do not reach this figure, they will have to submit Form 202 if the result of their previous exercise was positive.

This means that small companies, with less than six million euros in revenue and no positive result, will not have to submit Form 202.

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