Deferral tax in Spain: all you need to know
Are you confused about AEAT deferral and tax deferral extensions? You are not alone. With constant changes in tax regulations, it can be a challenge to keep up with the latest updates. But don’t worry, we’ve got you covered. In this comprehensive guide, we’ll break down everything you need to know about AEAT deferral and tax deferral extensions.
From understanding the basics to navigating the application process, we’ll provide you with the information you need to make informed decisions for your business. Our expert team of tax professionals will explain the advantages and potential risks involved in deferring your tax payments.
Whether you are a small business owner, individual taxpayer or self-employed, this guide will equip you with the knowledge you need to effectively manage your tax obligations while maximising your cash flow.
So, let’s dive in and demystify AEAT deferral and tax deferral extensions together.
Introduction to deferral Tax
Tax deferral from the AEAT Spanish Home inland revenue, or Agencia Estatal de Administración Tributaria, is a mechanism that allows taxpayers to postpone payment of their taxes until a later date. This extension is especially useful in situations where taxpayers face temporary financial difficulties or need more time to raise the necessary funds to meet their tax obligations.
The main objective of the AEAT deferral tax is to provide temporary relief to taxpayers, allowing them to maintain adequate cash flow to cover other business or personal needs. However, it is important to note that the extension does not relieve taxpayers of the obligation to pay their taxes, but simply gives them more time to do so.
The AEAT extension applies to different types of taxes, such as:
- Value Added Tax (VAT),
- Personal Income Tax (IRPF)
- Payment in instalments (IRPF)
- Corporate Income Tax (IS).
Taxpayers must meet certain requirements (no enforceable debts) and follow a very simple application process (with a digital certificate) to benefit from this extension. Below, we will go into more detail on how the tax deferral works and who is eligible to apply for it.
BEWARE, there are some taxes that cannot be deferred, such as,
- Employee withholding taxes
- Withholding taxes on rent.
What is tax deferral and how does it work?
Deferral tax is an option that allows taxpayers to delay paying their taxes until a later date. This option is especially useful for those who are experiencing temporary financial difficulties and need more time to raise the necessary funds.
To apply for the , taxpayers must submit a request to the AEAT. The application must include, the bank account number where you want the deferral tax payments to be paid by direct debit, from when you want the deferral tax to start, the terms of the deferral and detailed information on the reasons for requesting the extension, as well as any supporting documentation demonstrating the taxpayer’s current financial situation.
Once the application is submitted, the AEAT will assess the situation and determine whether the deferral tax is granted (AEAT may grant the deferral automatically) if it meets a number of requirements). If so, a new deadline will be set for the payment of the tax. It is important to note that the deferral does not exempt the taxpayer from paying the taxes, but simply extends the deadline for doing so.
It is important to note that the extension of tax payment will carry interest at the interest rate in force each year (in 2023, 4.062%). It is therefore essential to understand the benefits and potential risks before applying for an extension.
Deferral tax from 2023
In 2022 a law was passed so that the maximum deadlines for the deferral tax debts will be reduced.
Key dates and deadlines for tax deferral 2023
Until 15 April 2023
In the end, this law is repealed, but applications for deferral and instalment payments that are being processed before 15 April 2023 will be subject to the provisions of the repealed law of 2022. In other words, until 15 April, the exemption limit was €30,000.
From 15 April 2023
It will be possible to request more time for deferrals and they are as follows:
With guarantee on unencumbered real estate the maximum term will be 36 months.
With a guarantee: for tax debts guaranteed with a guarantee, the maximum period will be 60 months.
Other guarantees: If other guarantees are provided, the maximum term will be 24 months.
Waiver of guarantees: In this case the maximum term will be 12 months. (Remember that the waiver of guarantees is given to taxpayers who lack sufficient assets and who accredit that the execution of their assets could be very detrimental to the continuity of their business.
Exemption from guarantees: Tax debts up to €50,000 whose deferral is granted by the tax authorities automatically without providing guarantees will be up to 24 months in the case of self-employed and/or individuals and 12 months in the case of companies or any other legal entity.
Benefits of Spanish home inland revenue (AEAT) extention tax for companies
The deferral tax of the AEAT can offer a number of significant benefits for businesses. Some of the main benefits include: Improved cash flow: AEAT rollover allows businesses to maintain adequate cash flow by postponing tax payments until a later date. This can be particularly useful in situations where businesses face temporary financial difficulties or need more time to raise the necessary funds.
Increased financial flexibility: By postponing tax payments, businesses can have more financial flexibility to cover other business needs, such as investments or operating expenses. This can contribute to sustainable growth and better management of financial resources.
Additional time for planning: The extension of the AEAT provides companies with additional time to plan and organise their finances. This can be particularly useful during periods of economic uncertainty or when a significant change in the company’s financial situation is expected.
It is important to note that the AEAT extension does not exempt companies from the obligation to pay their taxes, but simply gives them more time to do so. Companies must continue to comply with all other tax obligations and file the corresponding returns within the established deadlines.
Read on to discover and demystify some common misconceptions about the AEAT extension and tax payment extensions.
Common misconceptions about AEAT rollovers
There are several common misconceptions about AEAT deferrals or extensions and tax payment extensions. Below are some of the most common misconceptions and their clarification:
- AEAT extension is a tax write-off: This is incorrect. The AEAT extension does not relieve taxpayers of the obligation to pay their taxes, but simply gives them more time to do so. Taxpayers must still comply with all other tax obligations and file the corresponding returns.
- AEAT’s deferral has no consequences: This is incorrect. While AEAT deferral may provide temporary financial relief, it may carry associated interest or surcharges, depending on current tax regulations. Taxpayers should understand the potential additional costs before requesting an extension.
- All AEAT extension requests are approved: This is incorrect. Each extension request is assessed individually by AEAT, and the granting of an extension depends on each taxpayer’s specific financial situation and circumstances. Not all extension requests are approved.
It is essential to understand the common misconceptions about the AEAT deferral tax extension and to have a clear understanding of how this mechanism works before making decisions about requesting an extension.
