Taxation and accounting must always go hand in hand in companies. Because if the accounting data contains inaccuracies, the tax returns will contain errors. And at this point, the dreaded tax inspection can come into play.
Another example of the importance of accounting is Article 11.3 of the Corporate Income Tax Act, which states that for an expense to be deductible it must be recorded in the profit and loss account or in a reserve account.
What are the accounting and registration obligations of companies
In order to carry out a good tax management in due time and form, it is essential to have up-to-date accounting records that reflect a true and fair view of the company. For this reason, the Corporate Income Tax Act and the Commercial Code establish a series of accounting and registration obligations for corporate income tax purposes. In other words, a set of rules that companies must comply with in relation to the keeping of their accounts and the documentation that supports them.
Its objective is twofold. On the one hand, to guarantee the transparency and reliability of the financial information that serves as the basis for companies’ tax assessments. On the other hand, to facilitate control by the tax authorities.
Accounting obligations
- Keep orderly and complete accounts. In chronological order, without blank spaces, interpolations or erasures. It must clearly, accurately and concisely reflect all the operations carried out by the company.
- Compulsory accounting books:
- Book of inventories and annual accounts. It opens with the detailed opening balance sheet of the company. At least quarterly, the trial balances must be transcribed with the trial balances. Also the annual accounts and the year-end inventory.
- Day book. This records all transactions relating to the company’s activity. The joint entry of the totals of the operations for periods of up to one quarter is valid, provided that the details appear in other books or concordant registers.
Annual filing with the Commercial Register
Article 27 of the Commercial Code stipulates that, at the end of each financial year, companies are obliged to file annual accounts with the Commercial Register.
These annual accounts comprise the balance sheet, the profit and loss account, the cash flow statement, the statement of changes in equity and the notes to the financial statements. This is the information on the basis of which the corporate tax base is determined.
Registration obligations
Article 30 of the Commercial Code states that companies must keep the books, correspondence, accounting documents, invoices, contracts and supporting documents concerning their business for six years from the last entry made in the books. This is in contradiction with the statute of limitations for the administration to determine the tax debt, which is four years.
It is therefore the case that, although the administration’s right to adjust a tax is time-barred, the company still has to keep the accounting books and other documentation. This is because in the case of the offset or deduction of certain tax credits, the tax authorities have 10 years to check the validity of the offset or deduction.
Conclusion
In summary, compliance with accounting and registration obligations for corporate tax purposes is essential for companies, as non-compliance can lead to administrative and even criminal penalties. To avoid these risks, it is advisable to seek professional advice from experts in accounting and taxation.