Individual Entrepreneur: when is it mandatory to have organized accounting?

Author Maria Duarte

To have or not to have organized accounting? For some Individual Entrepreneurs (ENI), having an accountant is mandatory. Find out whether or not you should have organized accounting and under which circumstances.

For those who are ENI or self-employed, there are two ways to organize the company's accounts: simplified regime or organized accounting.

What is organized accounting?

Organized accounting is a tax option for taxing income resulting from a commercial activity or business. This model allows a deduction from income (sales) of a good part of the charges related to the activity, even if they are higher than 25%, and the income tax is levied on profits (sales less costs).

Thus, in organized accounting, a business must comply with the registration, declaration and file of all transactions related to the activity so that it can comply with tax obligations, and only the taxable profit determined will be subject to IRS.

There are companies that are obligated to have organized accounting. Which ones?

Having organized accounting can be an option for a self-employed person or an individual entrepreneur. However, there are cases where it is even mandatory to have organized accounting, such as:

  • All companies, such as public limited companies (sociedades anónimas) and private limited companies (sociedades por quotas).
  • Professionals or sole proprietors with a net annual income of more than 200.000 euros.

For these cases, it is necessary to have a Certified Accountant (CC) who reviews the various invoices of the company and other movements, helping to prepare annual tax files. This is a monthly cost that the company must have, and can cost from 100€ per month depending on the volume and complexity of your business.

The CC will also be responsible for declaring and sending all taxes payable. In addition, you should choose a CC with availability and whom you trust to ask the necessary questions so that you can obtain tax optimization and always be well informed and oriented.

What expenses can I deduct?

In organized accounting, you can deduct professional expenses, that is, those related to your activity, such as fuel from your own vehicle, stays, computer and office supplies, among others.

The companies pay tax on the profit generated, but the amount of the expenses is taken from that amount. So, if you have high profits and also expenses to present, you can have a tax optimization.

Do the self-employed and ENI have any drawbacks?

If you are one of these cases and you have organized accounting, you must have a unique bank account for your activity, so that it can be shared with the accountant. Thus, the income you may have outside your business cannot be mixed in the same bank account.

What are the advantages?

Organized accounting has an advantage that simplified accounting does not: the deduction of expenses. This makes it possible to be more tax efficient. Having the support of a paid accountant also helps to ensure that all tax obligations are met and also that you are aware of invoices and other documents that can help with deductions.

These are some points that you should know about organized accounting that can help you a lot in your business.

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