Partners of companies that provide professional services shall declare their remuneration as economic activity.

Should the remuneration of a partner who provides services to your company be declared in the IRPF as income from work or economic activities? And in which cases should a VAT invoice be issued? The taxation of partners of professional firms has generated numerous conflicts with the Tax Agency in recent years. The Government tried to shed some light on the tax reform that came into force this year and, recently, the Directorate General of Taxes (DGT) offered a more detailed explanation. The Registry of Tax Advisor Economists (REAF), belonging to the General Association of Economists, pointed out yesterday in the presentation of its report on the income tax campaign that the framework set by the Administration “is sensible”.

Taxes pointed out that the partner of a company must declare his taxation as income from economic activities when he is registered in the Special Regime for Workers (RETA), provides a professional service to the company and, in turn, the company also offers professional services to third parties. This is the case, for example, of a partner in a law firm, whose remuneration must be declared as a professional activity. On the other hand, an architect who is a partner of a construction company to which he provides services may impute his income as earned income, that is, as if he were a salaried employee; This is because, in this case, the construction company is a business and not a professional activity.

In principle, declaring the remuneration as a professional activity may be more beneficial because it allows expenses to be deducted. In any case, the rule has generated some discomfort in groups that traditionally opted for the earned income method. For example, it was common for a tax advisor who was a partner in the company to which he provided services to be taxed as a salaried employee. On the other hand, in the case of lawyers, it was more common to declare the remuneration as a professional activity.

On the other hand, until now, the unwritten rule indicated that those who received an income as salary were not subject to VAT and those who opted for the professional activities route had to issue an invoice. The technical secretary of the REAF, Luis del Amo, pointed out that the Tax Authorities defend in their consultations that Personal Income Tax and VAT are independent taxes that are not related. In other words, when deciding whether a partner who provides services to a partnership must apply VAT, it does not matter whether the partner is taxed for personal income tax purposes.

The Treasury notes that factors such as the means of production, working conditions and remuneration must be analyzed. “If the main assets are in the company, the services will generally be work services,” states the REAF, i.e., in these cases the taxpayer will not be subject to VAT. However, even if the means are the company’s own, the legislation offers other possibilities to avoid VAT. For example, if the partner is part of the company’s structure and complies with certain schedules, he will not have to apply VAT, with the savings in bureaucracy that this entails.

Monedero, Personal Income Tax and Corporate Income Tax
On the other hand, the REAF entered, without citing it, in the open debate around cases such as the number three of Podemos, Juan Carlos Monedero. The political scientist regularized his situation after collecting 425,000 euros through his company, instead of as an individual in the IRPF. Monedero defended that the legislation allowed him that option and defended that it was indifferent to pay personal income tax or to do it through the corporate tax and, subsequently, to distribute dividends; However, the REAF experts pointed out that the services provided by a partner to its partnership should be remunerated at market prices. This means that Monedero should have been taxed on the earnings from his reports in the IRPF.

(News extracted from CINCO DÍAS)