Deferring corporate tax in Spain: How is it done?
Deferred corporate tax: How is it done?
It is possible to defer the payment of corporation tax, under what circumstances and under what conditions? This article gives you all the information you need.
How to defer corporation tax
The first thing to point out is that deferring payment of corporation tax does not mean losing the obligation to pay the tax, which all commercial companies are obliged to do.
It is simply an agreement with the Tax Agency for an extra period of time to meet the obligations.
In what cases does this occur? Mainly when there is a cash flow problem in companies that is temporary.
For example, during the pandemic, many companies asked for a postponement in order to be able to meet other fixed cost obligations.
The same happens when there is an unexpected expense that has to be paid as soon as possible and the opportunity cost of not doing so is high.
However, there is only one case in which payment can be deferred, when the debt is annual; you cannot defer payments on account of tax when you have opted for payment in instalments.
That said, the procedure has a series of conditions and obligations. We can highlight the following:
1. Who and where to apply for deferral of corporate income tax.
The deferral procedure is carried out at the request of a party, by the company’s administrators or collaborators.
The application for deferral of payment must always be made to the Spanish Tax Agency, which collects this tax.
The only exception to this rule is in the tax offices of the provinces of the Basque Country and Navarre, which are responsible for managing the tax in their territory.
2. Documentation to be presented
When it is a question of deferring payments, tax Form 200 for the deferral of debts must be completed.
And the request for deferral must be specifically stated.
- In the event that the debt is less than 30,000 euros (until 14 April 2023)
- And less than 50,000 euros (from 14 April 2023),
It tends to be granted automatically, whereas, if it is higher, the interested party will have to go to the Tax Agency to request the deferral and provide guarantees.
3. Duration of the extraordinary payment period
The extraordinary payment period, in the case of corporate income tax, is 6 to 12 months.
SMEs can pay in a maximum of 12 instalments (Pymes), while the self-employed can pay in a maximum of 24. Big companies can pay in a maximum of 6 months.
Remember that it is an annual settlement, so that the debt contracted must be paid in full. The request for deferral itself implies a deferral of the debt.
4. Interest to be accrued
In addition to the amount of the debt, the Tax Agency applies default interest for late payment, payable each month. For the year 2024, this is set at 4.0625%, which will be added automatically. It should be noted that this interest is updated annually, and may vary depending on general interest rates.
WHAT IF YOU STOP PAYING THE DEFERRED DEBT?
Due to liquidity problems, your company postponed last year’s corporate income tax for several instalments. What will happen if you are unable to meet any of the postponed payments?
Voluntary period
If you do not pay one of the instalments within the period granted to you, the tax authorities will initially respect the payment deadlines that have been agreed for the rest of the outstanding instalments.
Therefore, in the first instance, they will only send you a writ of execution demanding payment of the unpaid instalment.
After that, everything will depend on whether your company complies with the order:
- If you pay the unpaid amount within the period granted in the order, the tax authorities will only demand a surcharge of 10% (5% if you pay it before receiving the notification). The rest of the outstanding debt will not be affected.
- If you do not pay it within this period, the tax authorities will demand the unpaid amount with a surcharge of 20% plus interest.
But that’s not the worst of it: in addition, the whole of the instalment payment granted can be cancelled. In other words, the tax authorities can demand immediate payment of the entire outstanding debt.
Guarantees
In particular, this will happen if you have deferred the debt without guarantees or with guarantees covering the full amount.
On the other hand, the effects will be different if, when applying for deferral, you provided separate guarantees covering one or more of the deferred instalments:
- The tax authorities can only demand immediate payment of the remaining outstanding instalments covered by the same guarantee as the unpaid instalment.
- The remaining instalments (covered by other guarantees) will remain due as agreed.
Enforcement period
If your company does not pay a tax assessment within the voluntary payment period (e.g. a parallel assessment), the collection of the tax is transferred to the so-called “enforcement period”.
Once the enforcement period has started, you can also apply for a deferral of the initial debt and the surcharges due (unless the procedure has progressed and the tax authorities have already notified the agreement on the disposal of the seized assets, in which case a deferral is no longer possible).
Non-payment
In these cases, if your company fails to pay any of the amounts due:
If you have not provided guarantees or you have provided a guarantee that covers the entire debt, the non-payment will cause the entire outstanding debt to be considered in the enforcement period, and the Treasury will restart the enforcement procedure (which may end with the execution of the guarantees or the seizure of assets).
In other words, you will no longer be notified of a new deadline to pay the unpaid instalment.
However, if you have provided separate guarantees covering one or more deferred instalments, only the unpaid debt and the other debts covered by the same guarantee will enter the enforcement period.
If after the non-payment your company pays within the period granted in the order or before receiving the order, it will only have to pay the penalty surcharge; but if it misses the deadline, it will have to pay the entire outstanding deferred amount all at once.
Get the right advice
The option of deferring corporate tax can be useful to solve a one-off problem, as long as the perspective is not lost.
At Asesoría Orihuela Costa we provide a specialised service to SMEs so that you can respond quickly and efficiently to these incidents. Call us without obligation!
