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Between April 1st and June 30th, don’t forget to declare your isolated act at the IRSif you passed one in 2022.
Passing this act, also known as a single act, serves to receive a certain value after performing a service that is sporadic and not continuous.
This is a way to earn extra income. without needing to have open activity in Finance. However, you can only do it once a year, as the name implies. Receipts for the isolated act must be issued electronically on the Finance Portal.
What you should know about the isolated act in the IRS
Some taxpayers still have doubts about how to declare the isolated act at the IRS. In cases where the taxpayer has provided services in 2021, but only receives payment in 2022, for example, how should he then declare the single act?
According to the law, this act is taxed in the IRS in the year in which the invoice-receipt or receipt is issued. That is, for IRS purposes, income is only considered on the date of receipt or invoice-receipt (these are issued after payment), regardless of the date of provision of services.
There are some specific situations in which the taxpayer is not obliged to issue an invoice, such as a doctor who performs operations totally exempt from VAT, as in this case the cash principle works. This is because the isolated act is considered IRS category B incomewhich means that it has to be declared in Annex B. When it does not exceed 12,500 euros, it is exempt from withholding tax.
How to declare the isolated act in the IRS?
As mentioned, income from the isolated act is declared in Annex B of the IRS, in accordance with the following procedures:
Table 1: choose option 2 (relating to the isolated act);
Table 2: indicate the year (in this case, 2022) to which the income relates (must already be pre-filled);
Table 3: Indicate the activity code related to the isolated act;
Table 4A: declare the value of gross income (excluding VAT);
Table 6: indicate the IRS withholding amount (if applicable).
Isolated act at the IRS: when does VAT have to be paid?
The period given to taxpayers to pay the VAT for the isolated act is until the end of the month following the date of issue of the invoice-receipt or invoice for the isolated act.
As a general rule, the issuance of an isolated act always implies the charge of VAT, typically at the normal rate of 23%. In very specific cases, VAT may be charged at the intermediate rate of 13% or at the reduced rate of 6%.
Taxpayers should go to the Finance department, where they will pay VAT (23%) on this provision of services (except for the exceptions provided for in Article 9 of the VAT Code), or you can request payment through the Finance Portal, where you can obtain the P2 model guide, which has a reference for payment that you can make at an ATM.
If the taxpayer does not pay the VAT within the deadline, he will be subject to the collection of compensatory interest and the initiation of an administrative offense procedure for the imposition of a fine, which may vary between 15% and half of the missing tax.
7 questions and answers about the isolated act
When is it necessary to submit a declaration of commencement of activity?
There are those who still question whether it is necessary to submit a declaration of initiation of activity in category B, when it comes to declaring the isolated act at the IRS. It is only necessary to do so if the value of the isolated act exceeds 25 thousand eurosotherwise it does not imply the delivery of a declaration of commencement of activity.
Can I pass an isolated act while receiving unemployment benefits?
Is it possible to pass an isolated act even if I am receiving unemployment benefits?
According to rules currently established by Social Security, there is such a possibility as long as there is really only one isolated act. If you do so, you will not lose unemployment benefit, but during the duration of the activity that gives rise to the isolated act, the benefit will be suspended. You will therefore have to notify Social Security to suspend the attribution of the subsidy.
When you finish the activity, you can ask again to restart the payment of your installments.
note: If, during the unemployment subsidy attribution period, you start working as a contractor or as a self-employed person, even if you receive less than the amount of the unemployment subsidy for the activity carried out, there is always room for the unemployment subsidy to be suspended. However, you may be entitled to partial unemployment benefit, if the conditions for granting it are met and you provide proof of those conditions.
I went through an isolated act: do I have to deliver a tax return?
Taxpayers do not need to file a tax return when the isolated act is of an annual amount less than four times the value of the Social Support Index (1,772,880 euros in 2022)as long as it is your only income or you also receive income taxed at the withholding rates provided for in article 71 of the CIRS.
In situations where a dependent worker also performs an isolated act, he will always have to include that isolated act in the IRS, since it is not his only income.
Is the isolated act subject to withholding tax?
As mentioned, the isolated act must be declared to the IRS, but this will only be subject to withholding tax if its value exceeds 12,500 euros. But this does not mean tax exemption. It must therefore be included in the IRS declaration (Annex B).
The isolated act is considered IRS category B income when it results from activity:
- Industrial, commercial, livestock, forestry or agricultural;
- On its own, to provide services, including those of an artistic, scientific or technical nature.
How does the collection of VAT on the isolated act work?
The issuance of an isolated act always implies the charge of VAT, typically at the normal rate of 23%.
There are, however, exceptions, which are provided for in article 9 of the CIVA. The exemption from charging VAT applies, for example, to services provided by certain professionals, such as doctors, dentists, midwives, nurses, prosthetists, actors, musicians and sportsmen.
In what situations is the isolated act exempt from VAT?
Taxpayers who have provided services and transfers pursuant to article 9 of the VAT Code are only exempt from charging VAT. However, if the amount exceeds 12,500 euros, they will also have to withhold tax.
At the article 101 of the CIRS the various withholding rates applicable to income from the isolated act are foreseen, which vary between 11.5% and 25%.
There is also the possibility that, even if this amount is not exceeded, the taxpayer may choose to withhold on their own initiative to avoid paying so much IRS annually.
I spent an isolated act: do I have to hand over the SS annex?
If you carry out an isolated act, you will not need to fill in Annex SS.
How to issue an isolated act?
To issue the single act you must:
1. go to site the Finance Portal;
two. choose the menu “Citizens”;
3. Click in “Green Invoices and Receipts”this being one of the options available under “Frequent Services”;
4. insert your Taxpayer Number It is Access password;
5. Select the option “Issue” and then press issue invoice or Invoice-Receipt. As it does not have an open activity in finance, this is considered an isolated act.
Then, these three options will appear:
- Receipt: issued after the amount of the activity has been charged and this being proof that the amount of the issued invoice has been received;
- Invoice: document to pay for the service in question;
- Invoice-receipt: issues the payment document and proof of payment.
To complete any of these options, you will always have to enter your customer’s VAT number, identify the service provided and the amount received, as well as select the VAT and withholding tax regime, in addition to substantiating the service provided.
If there is no open activity, the Tax Authority will automatically assume that this receipt is an isolated act.
Article originally published in July 2019. Last updated in March 2023.