Confianz

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  • Accounting and registration obligations for corporate tax purposes

    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.

  • Treasury faces millions in refunds for making merger taxation more difficult

    The Treasury could have to refund millions of euros to many companies for making taxation difficult in the special regime for mergers, acquisitions and spin-offs, better known as the FEAC regime. The possibility is very real, because both the Court of Justice of the European Union (CJEU) and the Supreme Court (SC) are currently analysing whether the Spanish regulations are in line with the European Directive.

    The current FEAC regime

    The irregularity would be found specifically in the special regime for spin-offs, which would make tax deferral difficult. According to Spanish law, when a company is extinguished and split into two new companies in which the partners do not participate in the same proportion, it is obligatory to pay tax at the time of the creation of the new companies. The tax authorities do not allow in such cases to defer taxation to a later point in time, when the shares are sold. The only exception to this rule is when the assets acquired are separate branches of activity.

    This is a very damaging rule for spin-off companies, which normally do not plan to sell. Because many of these restructurings are aimed precisely at promoting generational change.

    The position of the European Comission and the Supreme Court

    The European Commission considers that the Spanish rule goes against the European Directive because it establishes restrictive conditions instead of facilitating these operations. For this reason, following a letter of formal notice issued in 2019 and a reasoned opinion in 2023, it has referred Spain to the CJEU.

    Meanwhile, the Supreme Court has also upheld in an order of 10 April an appeal to determine whether it is in accordance with European law that in spin-offs where the partners do not hold the same proportion of shares, tax is only deferred if the assets acquired represent a distinct branch of activity.

    We are therefore at an impasse. It is most likely that the Supreme Court will not make its decision until the Court of Justice of the European Union has ruled.

    What to do now

    Confianz’s recommendation for companies that find themselves in this circumstance is to pay the tax authorities and immediately appeal the tax assessment. We will then await the pronouncement of the CJEU and the Supreme Court. If the courts conclude that the Spanish rule is not in line with the European rule, all those companies that have asked for a refund and still have the case open will be able to receive what they have paid. To this figure will have to be added interest for late payment of 4%.

    Spin-off companies that have paid less than four years ago are also in time to claim.

    The Treasury already has to pay back more than 11.2 billion euros

    The more than likely rulings against the FEAC scheme would add to the string of judicial setbacks that the Tax Agency has accumulated in recent times. According to the Ministry’s own estimates, the Treasury is already facing the return of more than 11.2 billion euros as a result of the latest adverse rulings. Most of them affect companies. The two most important are:

    • In January, the Constitutional Court overturned the 2016 Royal Decree-Law that tightened corporate income tax.
    • In May, the CJEU declared illegal the supplement to the Hydrocarbon Tax applied by the autonomous communities between 2013 and 2018.

    If your company is in any of these situations, Confianz will advise you so that you can recover the amount paid plus the corresponding interest for late payment.

  • What is a Large Company for tax purposes: requirements, obligations and benefits

    For tax purposes, for the Spanish Tax Agency, a Large Company has different rights and obligations than an SME. However, do you know what characteristics a company must meet in order to be considered a Large Company by the tax authorities? If your company is in a growth phase, you will be very interested to know. We explain everything in this article.

    What does the Treasury consider a Large Company to be?

    The Tax Agency considers any company, entrepreneur or professional whose turnover exceeds 6,010,121.04 euros per year to be a Large Company. The change of status is immediate, starting the following year.

    How is the trading volume calculated?

    The volume of transactions refers to the total amount of supplies of goods and services carried out, including those exempt from tax. This includes both transactions carried out during the year and those in which VAT has accrued, if the special cash basis scheme is not applicable.

    On the other hand, this calculation does not include VAT quotas, nor the equivalence surcharge, nor the compensation received by farmers, fishermen and stockbreeders who pay taxes under the Special Regime for agriculture, stockbreeding and fishing. Also excluded are: occasional supplies of immovable property, supplies of investment goods, financial transactions exempt or not from VAT, and exempt transactions relating to investment gold when they are not normal business or professional activity of the company.

    What are the consequences of acquiring Large Company status?

    Acquiring the status of Large Company changes many aspects of taxation. It has implications for the deadlines and ways of filing certain self-assessments, for the calculation of corporate income tax instalments, for the way of keeping record books and for the way of receiving notifications or replying to requests made by the Tax Agency.

    New obligations to the tax authorities

    Immediately, the company that becomes a Large Company must:

    • File form 036 with the Tax Administration online. In this way, it is communicated that the company has become a Large company.
    • File VAT self-assessments (form 303) every month and electronically.
    • Submit the withholding tax forms every month, electronically by means of a recognised electronic certificate, within the first twenty calendar days of each month.
    • Keeping the registry books by means of the electronic supply of invoicing records (SII).
    • Calculate the instalments of corporate income tax according to the method provided for in the law. If the net turnover during the twelve months prior to the date on which the tax period begins has exceeded €6,000,000, these payments must be submitted online by means of a recognised electronic certificate, on form 202, using the calculation method provided for in section 3 of article 40 of the Corporate Income Tax Act.
    • Receive administrative communications and notifications by electronic means.
    • If the company must file any of the following forms of self-assessments and informative declarations, electronic filing via the Internet is obligatory, using a recognised electronic certificate: 038, 156, 159, 165, 170, 171, 179, 180, 181, 182, 184, 187, 188, 189, 190, 192, 193, 194, 195, 196, 198, 199, 200, 217, 220, 221, 231, 232, 270, 280, 282, 289, 290, 291, 296, 345, 346, 349, 411, 430, 480, 611, 616 y 720.

    At Confianz we help you to properly manage your company in accordance with Spanish tax regulations. Our team is prepared to provide solutions tailored to the specific tax needs of each client.

  • Tax compliance: how to implement it in the company to avoid risks

    Tax compliance or correct compliance with all tax obligations is an obligation that requires significant efforts on the part of companies. And not only in terms of management, because keeping up to date with all the tax regulations in force at all times requires constant updating.

    It is essential to apply good tax compliance to ensure due compliance with all tax obligations in accordance with applicable tax regulations. From the payment of taxes to the filing of tax returns, including the control and mitigation of tax risks that may affect the organisation. Let us not forget that the Capital Companies Act establishes as one of the non-delegable powers of the management bodies the determination of the risk control and management policy, including tax risks. Failure to do so may result in liability for the company’s directors for not applying due diligence.

    Advantages of tax compliance

    Tax compliance is a management system that facilitates the identification, prevention and detection of tax risks in order to avoid complementary tax assessments, penalties or even accidentally committing a tax offence. Having a tax compliance system in place has significant advantages for the company and even its managers:

    • Avoid or minimise the risk of having to pay significant penalties or fines to the tax authorities.
    • Improve business reputation. Because appearing on the list of tax debtors can generate mistrust among customers, suppliers and partners.
    • Plan financial resources in advance. Acting in advance also makes it possible to avoid mistakes that can be detrimental to the company itself and to optimise the management of its monetary resources.
    • The risk of criminal liability for poor control of their tax risks is minimised. Companies can be charged with an offence against the tax authorities if they seriously fail to comply with their tax obligations.
    • The risk of a possible subsidiary liability of the directors for the tax debt is limited. Tax compliance is an additional means of proof to demonstrate due diligence on the part of the directors.

    How to achieve tax compliance

    The UNE 19602 Standard (Tax compliance management systems and requirements with guidance for their use) establishes the key elements that a company must take into account in order to implement a tax compliance system:

    • Understand the tax laws and regulations affecting the company and know how to apply them.
    • Maintain accurate and up to date accounting to avoid significant alterations in the outcome of the company’s tax assessments.
    • Define a timetable of tax obligations with the corresponding deadlines. This will avoid receiving penalties or having to pay interest for late payment.
    • Have a tax compliance officer or a tax compliance body in charge of approving and publishing the tax compliance policy and defining due diligence processes with employees, suppliers and business partners. This role can also be performed by an external tax advisor.
    • Define a tax compliance policy with commitments and objectives.
    • Establish a whistleblowing channel through which employees can report suspected bona fide tax breaches.
    • Use accounting and tax management software that complies with the Anti-Fraud Law and allows the automation of accounting processes. It should prevent parallel accounting and the alteration and cancellation of invoices. This will increase efficiency, reduce the possibility of making mistakes and speed up the filing of tax returns.

    If your company needs help in implementing a tax compliance system, the tax experts at Confianz can help you develop a tailor-made one.

  • New Carbon Border Adjustment Mechanism (CBAM) for EU importers

    The European Union’s firm commitment to environmental protection and the fight against climate change has materialised over the last few years in ambitious regulations. For example, the greenhouse gas emissions trading scheme, which aims to ensure that products manufactured in the EU incorporate the cost of the carbon emitted in their production.

    These regulations have raised concerns about the risk of carbon leakage. This concept refers to the fact that EU levies can lead to a relocation of production to other countries with fewer environmental restrictions. This could even lead to a global increase in carbon emissions.

    Level playing field for European and imported products

    To address this risk, the Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishes a Carbon Border Adjustment Mechanism (CBAM). Under it, certain imports may only be made by persons or companies that have the status of authorised declarant and purchase sufficient certificates to cover the emissions implicit in the imported goods.

    Ultimately, the CBAM aims to ensure that imported products are subject to a regime that applies carbon costs similar to those borne by products manufactured in the EU.

    This is a new development that will be implemented in the coming years. At Confianz we are helping our clients to analyse it in depth, as in some cases it could mean a loss of profitability that could endanger the business.

    Obligations of EU importers

    The Carbon Border  Adjustment Mechanism (CBAM) is similar to emissions trading schemes. This instrument requires importers:

    • Obtain authorised declarant status prior to import;
    • Declare the implied emissions of imported goods;
    • Ensure that the declared emissions are verified by an accredited verifier;
    • Acquire and present the relevant certificates.

    To which goods does the CBAM apply

    The CBAM applies to goods that meet two conditions:

    • They are listed in Annex I of the Regulation. That is to say, those corresponding to the cement, electricity, fertilisers, foundry, iron, steel, aluminium and hydrogen sectors. Products processed from these goods as a result of inward processing arrangements are also concerned.
    • They originate in a non-EU country. However, goods from Iceland, Liechtenstein, Norway, Switzerland, Büsingen, Heligoland, Livigno, Ceuta and Melilla are excluded from this rule.

    How CBAM works

    As we have already seen, persons or companies wishing to import goods affected by the CBAM are obliged to register as an authorised declarant in the CBAM Register. In this way, they obtain a unique CBAM account number, which is essential for the customs authorities to allow the import.

    Each year, by 31 May at the latest, authorised declarants must submit a declaration for the previous calendar year, indicating:

    • The total quantity of each type of imported goods.
    • The emissions implied by such goods validated by an accredited verifier.
    • A copy of the verification report issued by an accredited verifier.
    • The total number of CBAM certificates to be delivered within the same timeframe.

    When does the CBAM enters into force

    Between 1 October 2023 and 31 December 2025, a transitional period is opened in which the importer must already submit a quarterly report on imported goods to the Commission.

    From 31 December 2024, the provisions concerning the application for and granting of authorised declarant status shall apply.

    From 2027 onwards (for 2026 operations), reporting of implied emissions and surrender of CBAM certificates will be mandatory.

    For further details, please contact us.

  • How to declare mixed (private and business) use of company cars

    Company cars that are also used privately by staff often give rise to a lot of tax questions. How should the costs of a fleet of vehicles be treated for income tax and VAT purposes? Read on to find out all the details.

    What happens when a company car is used for both work and personal use

    Many companies purchase or lease vehicles to provide them to employees who need to travel frequently, such as sales staff or management staff. Questions about the tax treatment of this expenditure begin when employees also use the car on a personal basis outside working hours.

    Over the years, this duality in use has led to great disparity in the criteria expressed by the Administration and the courts. For this reason, the AEAT has recently published a note clarifying the criteria applicable to this type of remuneration.

    Tax treatment of company cars in 2023

    Employee’s personal income tax

    When a company car is used for both professional and personal purposes, it is considered as remuneration in kind and must be included in the employee’s payroll, paying personal income tax and social security contributions.

    The main difficulty here is how to determine the exact monetary value of this remuneration in kind. There are different possibilities here:

    • Delivery of the vehicle to the worker as his or her own property. The cost of acquiring the vehicle and the associated taxes are included as remuneration for work in kind. The only limit is that the remuneration in kind cannot exceed 30% of the annual salary.
    • The worker uses the vehicle but does not own it.
      • If the vehicle is owned by the company, the remuneration in kind is 20% per year of the acquisition cost of the vehicle, without taking into account depreciation.
      • If leasing, the payment in kind is 20% per year of the market value of the new vehicle.
    • Use of the vehicle by the employee with subsequent delivery. During the period of use, the remuneration in kind is 20% per year of the new market value. If the car is eventually delivered to the worker, the market price of the used car at the time of delivery is considered, taking into account the previous use.

    Reductions for the use of energy-efficient vehicles

    In the case of the best performing vehicles from an energy efficiency point of view, they have interesting reductions:

    • Vehicles with CO2 emissions of less than 120 g/km and market value (before tax) not exceeding 25,000 euros: 15%.
    • Hybrid vehicles with a market value (before tax) not exceeding 35,000 euros: 20%.
    • Battery electric vehicles (BEV), extended range electric vehicles (E-REV) or plug-in hybrid electric vehicles (PHEV) with a minimum range of 15 km and a market value (before tax) not exceeding 40,000 euros: 30%.

    Company VAT

    As far as VAT is concerned, as the vehicle is a mixed-use vehicle, the company will be able to deduct 50% of the input VAT. 

    If the business use of the vehicle exceeds 50%, it is possible to try to deduct a higher percentage, but the tax authorities impose considerable restrictions on this possibility. The hours foreseen in the collective agreement, weekends, public holidays, holidays and working hours outside working hours on working days will be taken into account.

    Tax planning for company fleet management

    With increasing scrutiny from the Inland Revenue, careful consideration needs to be given to tax planning around the use of company cars to avoid penalties and disputes. At Confianz we monitor changes in current regulations to offer our clients the best tax approach.

  • The eight types of inspections carried out by the tax authorities to monitor companies

    The tax authorities have intensified their surveillance through inspections of companies. According to the data for 2022 that have just been made public, almost 1.9 million extensive tax checks were carried out in that year. This is 5.2% more than in the previous year and 16.1% more than in 2020.  Advances in technology to detect unreported income or misapplied expenses by businesses have greatly facilitated this growth.

    At Confianz, we consider it vital that companies are prepared and well advised in this type of situation. Knowledge of the areas on which the tax authorities focus their attention can make all the difference.

    Among the most frequent reasons investigated were improperly applied VAT or personal income tax deductions, or income that has not been declared but appears in the Tax Agency’s databases.

    Inquiries and on-site visits to the company

    When there are discrepancies between the data in the Inland Revenue’s databases and those declared by the company, the Tax Agency usually verifies whether the company complies with its tax obligations. To do so, it uses two methods:

    • The requirement, which consists of a registered letter requesting documentation justifying part or all of the income and taxes declared. It also includes a form of representation to send the required information to the Tax Agency.
    • The on-site visit to the company, sometimes by surprise, is an option reserved for the most flagrant cases, the aim of which is to gather first-hand the evidence necessary to prove the alleged tax fraud. In 2022, 29,086 inspections of this type were carried out, most of them corresponding to files belonging to the so-called VAT Visits Plan 2022, where all possible frauds related to this tax are checked.

    The eight points on which the Tax Agency is focusing its attention

    The 1.9 million inspections carried out by the tax authorities on companies in 2022 are spread across these eight main areas:

    1. Enforcement

    It includes almost all of the management area’s checks on personal income tax, control of withholdings and other taxes, taxes declared after the deadline, etc.

    2. Control of economic activities

    It encompasses almost all the checks, requirements and visits to monitor the underground economy, undeclared income or even VAT or personal income tax deductions misapplied by the self-employed and small businesses.

    3. Formal checks

    They deal with all issues of formal defects in tax compliance and payment, as well as formal errors in invoices and accounting books.

    4. Equity and corporate analysis

    It encompasses all actions to monitor the assets of entrepreneurs operating through legal entities, in order to prevent them from linking their personal assets to those of their companies in order to evade taxes.

    5. Concealment of activity and abuse of corporate forms

    Along the same lines as the previous section, it investigates the misuse of legal entities to hide income obtained by individuals in order to obtain more tax advantages.

    6. Information analysis actions

    These are the checks that are carried out thanks to the detection of any tax irregularity through the Tax Agency’s computer systems. By cross-checking data, the tax authorities can check for misapplied deductions, undeclared income or any other infringement.

    7. Large companies, multinationals and tax groups

    This group includes all actions against companies with a turnover of more than six million euros to uncover any concealment of income, VAT infringements and other irregularities.

    8. Other verification actions

    They include all other actions, such as summonses, reports, analysis of complaints and actions to analyse taxpayers with the aim of ensuring tax compliance.

    At Confianz, we specialise in guiding companies and freelancers through each of these areas, ensuring compliance and minimising risks.

  • How to use tax debt offsetting to overcome business difficulties

    Offsetting a tax debt may be the easiest way for a taxpayer, self-employed person or company to settle accounts with the tax authorities without the risk of having their accounts or assets seized.

    Offsetting consists of settling the tax debt in whole or in part against credits recognised by administrative act in favour of the debtor.

    Types of tax debt offsetting

    The offsetting of tax debts can be carried out ex officio, by the administration itself, or at the request of the taxpayer.

    Tax compensation at the request of the taxpayer

    The debtor can apply for the offsetting of tax claims and debts held by him through a current account system.

    In this case, both tax debts that are in the voluntary payment period and those that are in the enforcement period can be offset.

    • In the voluntary period. This prevents the start of the enforcement period of the debt concurrent with the credit offered. However, interest for late payment may be generated until the date of recognition of the credit.
    • During the enforcement period. In this case, the seizure of the debtor’s assets, property or rights is suspended.

    The decision must be notified within six months. If the debtor does not receive the decision after this period has elapsed, the application must be deemed to have been rejected.

    The extinction of the tax debt occurs at the time of filing the application or when the requirements for debts and credits are met, if this time is after the filing of the application.

    Advantages of applying for debt relief

    For taxpayers with debts, applying for compensation is a good way to stop seizures that can lead to the closure of the company. Because beyond their economic value, the use of machinery, vehicles and tools is normally indispensable for the operation of the business.

    Another advantage of applying for debt offsetting, even if only partially, is that it does not prevent the application for deferment or instalments of the remaining debt. In this way, indebted individuals or legal entities can gain some time to overcome their difficulties.

    Ex officio tax clearing

    The Inland Revenue can also carry out the entire tax debt offsetting process ex officio. It is quite common for the Tax Agency to deduct any debts it may have with the taxpayer, self-employed person or company from its outstanding refunds.

    A practical example. Imagine a self-employed person who has a VAT debt and, at the same time, a personal income tax return in their favour for which they have to return money. Once the voluntary period has expired, the tax authorities would subtract the amount necessary to offset the VAT debt from the personal income tax return. In this case, the self-employed person simply receives a notification.

    In the case of individuals and companies, the tax authorities may, ex officio, offset the following tax debts:

    • Those in the enforcement period.
    • Those in the voluntary payment period and resulting from the same limited verification or inspection procedure or from the practice of a new settlement due to the annulment of a previous one.
    • Those in the voluntary period and resulting from the execution of the resolution referred to in articles 225.3 and 239.7 of the General Tax Law.

    Do you have a debt with the tax authorities and do you think that applying for tax compensation would be beneficial for your company? Get in touch with us.