IGIC exemption for small traders has been abolished

[Goldenmaniac]

A lot has been reported about the increases to IGIC (like VAT) which came into force on the 1 July as a result of law 4/2012, de 25 de junio, de medidas administrativas y fiscales.

But until reading through the BOC I had not picked up until now that the IGIC registering exemption for small traders is to be abolished from 1 Jan 2013.

The applicable part is

Se suprime la denominada "franquicia fiscal por volumen de negocios" regulada en el artículo 10.1.28º de la Ley 20/1991, de 7 de junio, de modificación del Régimen Económico y Fiscal de Canarias. Se trata de una exención limitada, por lo que las cuotas del impuesto soportadas con destino a la actividad realizada no pueden ser deducidas por el empresario, y por tanto las cuotas del impuesto se convierten en uno más de los costes que el empresario o profesional tendrá en cuenta para fijar el precio de sus entregas de bienes o prestaciones de servicios, quedando así afectada la neutralidad que ha de predicarse de los impuestos indirectos. La existencia de esta exención en nada beneficia al adquirente de los bienes y servicios pues él no soporta la repercusión jurídica y formal del tributo porque la operación está considerada exenta, pero sí resulta incidido económicamente por el tributo, que en la misma medida se le traslada económicamente vía incremento de precio.

In real terms small traders whose turnover did not exceed 29k in 2011 or who have started their business in 2012 are still exempt until the 31/12/2012 But they must charge IGIC from the 1st Jan and they must submit their returns and pay the tax collected after that.
see http://www.diana-mcglone.com/#IGICchangeJun20012

[slodgedad]

Is this the final nail in the coffin for small business, or is it going to force more businesses to work illegally.

As has been mentioned time and time again, the more you try to pay your dues and be completely forthright, the more they move the goalposts.

[Goldenmaniac]

I love the way they try to justify it as protecting the end consumer :shark:

[chocaholic]

Presume this is for autonomos as well so this meansEVERYONE will be paying igicno matter what their turnover in. They dont care about autonomos and small businesses here. I agree ANOTHER nail in the coffin.
Been said thousands of times go after the illegal workers and employers instead of turning the screws
On those already paying more than enough and driving more struggling businesses to close.

[CIM]

That really seems to be the case chocaholic... They really do seem to want to put people off being legal here!

[Goldenmaniac]

I suppose you could argue that it's the consumers who have to be re-educated and made to see that cheap is not always best.
Perfect case in point,
Quote from Cowboy builder - No IGIC, minus 7%, no income tax paid, minus 24.75%, no Social Security Paid minus 200-300 odd euros a month, no public liability insurance when your ceiling falls in - priceless!

[Angusjim]

Maybe I missing the point here but if everyone is now having to charge IGIC tax to customers how are small traders being disadvantaged, bigger firms have had to charge it in the past and this has disadvantaged them against firms who did not charge it.:dontknow:

[Goldenmaniac]

Maybe I missing the point here but if everyone is now having to charge IGIC tax to customers how are small traders being disadvantaged, bigger firms have had to charge it in the past and this has disadvantaged them against firms who did not charge it.:dontknow: Yes I think you're right AJ but historically the sole trader type firms here haven't had the capital to invest to take them to the next level - there is quite a section of PYMES (small to medium businesses) who have never reached the threshold that was previously required to make them IGIC registered. I believe in the UK there is still a threshold before firms have to VAT register?

[Angusjim]

Yes I think you're right AJ but historically the sole trader type firms here haven't had the capital to invest to take them to the next level - there is quite a section of PYMES (small to medium businesses) who have never reached the threshold that was previously required to make them IGIC registered. I believe in the UK there is still a threshold before firms have to VAT register?

Do you mean did not reach or did not declare :wink2: yes there is a threshold in UK for VAT and at the moment when we are all competing for work it does give smaller firms a big advantage with no VAT & lower overheads

[CIM]

Its the same here Jim, We are charging fees plus 7% then paying a retention of 15%. The smaller (read that as illegal) agents have no IGIG issues, no tax to pay, no social - makes a massive difference. Couple that with the large amount who take all payments in cash (thus again avoiding tax and IGIC) and it does make for a rather un-level playing field.
I´d imagine in your industry there are also a lot of fly-by-nighters....

[Angusjim]

Its the same here Jim, We are charging fees plus 7% then paying a retention of 15%. The smaller (read that as illegal) agents have no IGIG issues, no tax to pay, no social - makes a massive difference. Couple that with the large amount who take all payments in cash (thus again avoiding tax and IGIC) and it does make for a rather un-level playing field.
I´d imagine in your industry there are also a lot of fly-by-nighters....

In our area of the UK there is a big black market at the moment in the building industry.

[bonitatime]

I commented on your post on Facebook this doesn't apply to all sole traders it depends on the business. As comercio menor, selling onto the public from a shop we will not be obliged to charge IGIC

[TenerifeTeddy]

I commented on your post on Facebook this doesn't apply to all sole traders it depends on the business. As comercio menor, selling onto the public from a shop we will not be obliged to charge IGIC

I agree, I am Exento de IGIC por comercio minorista for sales of computer parts, but have always had to pay IGIC on labour charges & DVD rentals. Now from 1 July Internet charges and phone calls are subject to IGIC as well at the new rate of 7%.

[Goldenmaniac]

I commented on your post on Facebook this doesn't apply to all sole traders it depends on the business. As comercio menor, selling onto the public from a shop we will not be obliged to charge IGIC

Just to make it clear we were discussing
ranquicia fiscal por volumen de negocios exemption due to volume of earnings as you rightly say the rules regarding minoristas do not appear to have changed

[KirstyJay]

So will it apply to services? Will I have to add IGIC onto my facturas for English classes in January? I'll need to inform the parents and students in advance...

[Goldenmaniac]

So will it apply to services? Will I have to add IGIC onto my facturas for English classes in January? I'll need to inform the parents and students in advance...
Unless the government recants before Dec 31 yes you will have to -have a look at the original here Kirsty because I know you can read it http://www.gobiernodecanarias.org/boc/2012/124/001.html

[9PLUS]

Maybe I missing the point here but if everyone is now having to charge IGIC tax to customers how are small traders being disadvantaged, bigger firms have had to charge it in the past and this has disadvantaged them against firms who did not charge it.:dontknow:

Jim one thing is collecting 7% for the Government the other is that costs me around €600 a year in administration charges which i either have to eat myself or pass it on to the client.

[Angusjim]

Jim one thing is collecting 7% for the Government the other is that costs me around €600 a year in administration charges which i either have to eat myself or pass it on to the client.

I feel your pain Mark if only my costs for collecting VAT/ PAYE was 600euros I would be a VERY happy man. But if everyone is collecting the 7% tax then is everyone not on a level playing field with the admin costs for this

[CIM]

This IGIC increase is also applicable on new build property. So on a 200,000€ price, raising it from 5% to 7% means the tax goes up from 10,000€ to 14,000€ - which is helpful.... Good old Canarian politicians - finger on the pulse and all that, doing their bit for the economy....

[9PLUS]

I feel your pain Mark if only my costs for collecting VAT/ PAYE was 600euros I would be a VERY happy man. But if everyone is collecting the 7% tax then is everyone not on a level playing field with the admin costs for this


I was talking from the clients point of view Jim

but i guess you are maybe right that every business should be on the same level

Would that mean it be correct to consider all types of holiday accommodation to be on the same level as well ?

[KirstyJay]

I feel your pain Mark if only my costs for collecting VAT/ PAYE was 600euros I would be a VERY happy man. But if everyone is collecting the 7% tax then is everyone not on a level playing field with the admin costs for this

That's a great idea. Let's have everyone on the same playing field. With that in mind then, our autonomo payments should be proportional to how much we earn too. If they did this, then I'd have no problem.... but at the moment I pay just shy of 260€ regardless of what I earn... and I'll tell you now - it's a lot more than 7% of my earnings. Then there's the pago fraccionado, etc etc. I'm sure that cuts into my proportional profits a lot more than it would for a large business, so either increase theirs, or lower mine. Then it'd be easier to trade legally and build a good business. Simple :)

[bonitatime]

This IGIC increase is also applicable on new build property. So on a 200,000€ price, raising it from 5% to 7% means the tax goes up from 10,000€ to 14,000€ - which is helpful.... Good old Canarian politicians - finger on the pulse and all that, doing their bit for the economy....

Unfortunately this comes from Madrid or maybe even from Brussels

What is worse is the fact that they also take away the deduction for mortgage payments for your tax bill.