The business investment tax credit is one of the most powerful fiscal incentives for freelancers and small businesses in Spain. It allows you to deduct a portion of the investment made in new assets used for your economic activity, either on your IRPF or Corporate Tax return, thereby encouraging business productivity and modernisation.
What is the Business Investment Tax Credit?
The deduction, regulated by Article 68.2.b of the IRPF Law, allows you to deduct 5% of the investments made in new tangible fixed assets or real estate investments used exclusively for your economic activity. In certain cases, the percentage is reduced to 2.5%, such as when the taxpayer has applied reductions from Article 32.3 IRPF or deductions for income in Ceuta, Melilla, or La Palma.
Which Investments Qualify for the Tax Credit?
To qualify for the business investment tax credit, the following conditions must be met:
- The assets must be new (used or second-hand goods are not accepted).
- They must be used exclusively for economic activity.
- They must remain in the business’s assets for at least five years or for their useful life if it is shorter.
- The investment must be made in the same tax year the income is earned or the following year.
Who Can Benefit?
- Freelancers under the direct estimation regime.
- SMEs that pay Corporate Tax.
- Small entities as defined in Article 101.
How Much Can You Deduct?
- 5% as a general rule.
- 2.5% if you have applied the reduction for starting an activity or deductions for special income.
The deductible amount cannot exceed the sum of the state and regional tax liability for the year.
Example: If you acquire new machinery for €50,000, you can deduct 5%, which is €2,500, provided you have a sufficient tax liability to do so.
How to Correctly Apply the Credit
- For freelancers (IRPF): Identify the expense in the depreciation model, apply the deduction in the settlement, and reflect it in the annual summary.
- For companies (Corporate Tax): Deduct it directly from the total tax liability. If you opt for accelerated depreciation, you must justify maintaining employment during the required period.
Required Documentation
- Purchase invoice.
- Bank payment receipt.
- Registration in the book of investment goods.
- Proof of the asset’s exclusive use in economic activity.
What is Accelerated Depreciation?
Accelerated depreciation (libertad de amortización) allows certain new assets to be depreciated at an accelerated rate or even in a single tax year. It is regulated by Article 102 of the LIS and is reserved for small businesses that increase their average workforce. The requirements are:
- Be a small business in the year the asset is made available.
- The asset must be new and used for economic activity.
- The increase in the average workforce must be maintained for 24 months after the initial investment.
The deductible limit is calculated as €120,000 x the increase in the average workforce.
Compatibilities and Incompatibilities
The business investment tax credit is incompatible with accelerated depreciation on the same asset. It is also incompatible with deductions applicable in the Canary Islands (Article 94 of Law 20/1991).
Frequently Asked Questions (FAQs)
Can I deduct the purchase of a car as a freelancer?
Only if it is used 100% for your professional activity. Mixed use can invalidate the deduction, as the Tax Agency strictly scrutinises vehicles.
Is the deduction for new fixed assets compatible with grants or subsidies?
Yes, but you must subtract the grant amount from the asset’s value before calculating the deductible base and report it correctly on your tax return.
Do I have to choose between accelerated depreciation and the investment deduction?
Yes. They are incompatible benefits for the same assets. If you meet the requirements for accelerated depreciation, you could depreciate the asset in full and not apply the deduction from Article 68.2.b).
The business investment tax credit represents a real opportunity to strengthen your business with fiscal and productive advantages. Whether you are a freelancer or an SME, you can boost your growth by investing in modern equipment, technology, or energy installations with a positive impact on your fiscal liquidity. Remember to plan carefully, keep the required documentation, and validate your choice with the Tax Agency to maximise your benefits.
If you need personalized assistance, at Entre Trámites we offer management and tax advisory services for freelancers and SMEs. You can contact us through this contact form for us to call you, or if you prefer, you can schedule a free consultation or write to us on WhatsApp.
