The deadline to file prepayment of Corporate income tax and Non-Resident Income Tax is drawing nearer

The obligation to file the form related to the April 2020 prepayment by the usual deadline (April 20) has not been changed, despite the situation caused by COVID-19 and the state of emergency declared on March 14, 2020, as occurs with all other self-assessments of State taxes. The possibility of deferring the amount payable, without guarantees and with interest qualifying for tax relief, envisaged in Royal Decree-Law 7/2020, of March 13, 2020 (See our Alert) is only envisaged for Small and medium-sized enterprises (SMEs) and independent contractors.

This year, the corporate accounts can contain new items specifically resulting from this situation, which is causing a slowdown in corporate activities and/or the reduction of corporate revenues and liquidity, while at the same time obliging companies to bear extraordinary expenses.

Correct accounting and special attention to the tax implications of the new expense items that can be reflected in the accounts as of the March 31 close are especially necessary at this time for the correct calculation of the amount payable; specifically where the mandatory form of prepayment is that based on the tax base generated between the beginning of the corresponding fiscal year and March 31.

The income per books until said date must also be determined correctly, given that this is the magnitude that must be borne in mind if what is known as the “minimum prepayment” applies. This minimum prepayment, 23% of the income per books (reduced only by prepayments made previously within the same fiscal year) is mandatory for entities that had net revenues exceeding ten million euros over the twelve months preceding the beginning of the fiscal year.

In this connection, and in the current circumstances, it is of special interest to analyze the accounting entries (and their implications when determining the corporate income tax base) related to, inter alia, the following items:

• impairment of holdings in subsidiaries, jointly controlled entities and associates; of financial assets held for trading; of inventory; or of property, plant and equipment, intangible assets and investment property; or of investments held until maturity;
• impairment of loans and accounts receivable or provisions for the enforcement of suretyships;
• debt composition and ordinary and extraordinary discounts granted in the context of commercial transactions;
• losses on the sale of claims;
• provisions that may result from labor reorganization (collective layoff procedures (EREs) and temporary collective layoff procedures (ERTEs), modifications of working conditions or another type of restructuring of the activity;
• provisions that may have to be recorded to reflect possible indemnification for contractual breach;
• provisions for commercial transactions (sales returns and guarantees) or for onerous contracts.

All of the foregoing without forgetting the necessary attention to a correct deferral/accrual of revenues and expenses.