Many taxpayers often wonder whether they can defer or pay in instalments the debt arising from their regular tax returns and, if so, what process to follow and within what deadlines it must be paid.
Which tax debts can I defer?
First of all, it should be made clear that not all tax debts can be deferred. Article 65 of the General Tax Law establishes that, among others, the following cannot be deferred:
- Those to be paid by the withholding agent or the party required to make payments on account, so withholding returns for rentals, or for employment income or income from movable capital (interest or dividends, for example) cannot be deferred.
- Those arising from the instalment payment on account of Corporate Income Tax
- Those originating from passed-on taxes, unless it is proven that the amounts passed on have not been paid. This means that deferral or instalment payment of a VAT return can only be requested if it can be proven that, on the date of the application, the part of the output VAT to be deferred has not been collected.
- Those resulting from the enforcement of final decisions dismissing an appeal, economic-administrative claim or contentious-administrative appeal, when those debts had previously been suspended while the appeals or claims were being processed.
If deferral/instalment payment of any of these debts were requested, the application would be rejected.
It should also be noted that deferral applications can be submitted both during the voluntary payment period, which suspends the start of the enforcement period, and when the debt is already under enforcement (until the moment the taxpayer is notified of the decision to sell the seized assets). For example, in the case of tax self-assessment returns to be filed, the application can be made when filing the return itself, although certain information will need to be provided afterwards.
Is it necessary to guarantee the deferred tax debt?
According to Order HAP/2178/2015, of 9 October, debts of less than 30,000 euros can be deferred without providing a guarantee. Above that amount, the regulations require sufficient guarantee to be provided to cover the debt, the amount of late-payment interest plus 25% of both, in the case of debts in the voluntary period. If they are in the enforcement period, the amount of the debt to be deferred, including the enforcement surcharge, plus late-payment interest plus 5% of both amounts.
The General Tax Law establishes a list of possible guarantees, notably bank guarantees, mortgage guarantees, surety insurance, etc.
In this regard, it should be remembered that if a sufficient bank guarantee is provided, the deferral is automatic, whereas with other guarantees it is the Tax Administration that assesses the sufficiency and suitability of the guarantee offered.
It should not be forgotten that, where a guarantee is required, the legislation provides for the possibility of requesting a deferral with total or partial exemption from guarantee, although in these cases it must be rigorously proven that there are no assets or rights that could be offered as a guarantee.
What is the procedure for requesting deferral/instalment payment?
An application for deferral/instalment payment must be submitted, including certain information, namely (i) identification of the taxpayer, stating the company name or full name and tax ID number, (ii) identification of the debt to be deferred, stating the amount, concept and voluntary payment date and, if available, it is advisable to include the assessment or file reference, (iii) the reason for the application, (iv) the payment schedule proposed by the taxpayer, indicating instalments and the payment start date, (v) the bank account number to which the Administration should charge the instalments and (vi) the guarantee offered, if required.
A the application must be accompanied by, among other things, a bank guarantee commitment if available o, if other guarantees are offered, the impossibility of obtaining a bank guarantee must be proven, together with a valuation of the assets offered as a guarantee and the balance sheet and income statement for the last financial year closed. In the case of exemption from guarantee, similar documentation is required, plus a responsible declaration and documentary evidence stating that there are no assets or none other than those offered as a guarantee, and an economic and financial viability plan justifying the ability to meet the requested deferral or instalment payment.
In addition, if deferral of a passed-on tax such as VAT is requested, a list of unpaid issued invoices, justification of the non-payment and a list of paid received invoices must be attached.
It is important to note that if the initial application needs to be corrected due to missing information or documentation, the Administration must notify the taxpayer and grant a period of 10 working days to make the correction.
Once the application has been submitted, the Administration will assess it, as well as the suitability and sufficiency of the guarantees provided, and will decide on it.
a) Acceptance of the deferral application
If accepted, it will send a decision informing of the final payment schedule, which may not coincide with the one proposed by the taxpayer. In that case, the instalment amounts will include the corresponding late-payment interest accruing from the end of the payment period until the date of each instalment in the schedule.
If the taxpayer fails to meet any of the payment deadlines, that instalment would automatically enter enforcement with the corresponding surcharge.
b) Refusal of the deferral application
And, if the application is refused, a new payment period would begin upon notification of the refusal, depending on whether the debt was in the voluntary payment period or under enforcement.
It should be pointed out that the inadmissibility of a deferral application is not the same as its refusal: Inadmissibility of the deferral occurs, for example, when it is requested for debts that cannot be deferred, when the request for correction is not answered or is answered incompletely, etc.
This inadmissibility is equivalent to the deferral application being deemed not submitted for all purposes, so the debt would automatically be under enforcement from the day after the payment deadline. On the other hand, as indicated, the refusal of the application gives rise to a new voluntary payment period.
In that case, the Administration will charge the late-payment interest for the elapsed period but could not charge the enforcement surcharge, so taxpayers thus have a strategy to gain time in the event of a temporary cash need around the days when the payment deadline for a particular debt falls.
In any case, it is always advisable to seek advice beforehand to avoid unexpected surcharges and penalties
