COVID-19: New measures changing the time period for preparation and approval of financial statements and their tax consequences

Spain - 05 / 27 / 2020

Spain Alert

Royal Decree-Law 19/2020 states that the three-month time period for preparing financial statements and other documents required by law will start to run from June 1, 2020, and reduces the time period for approving financial statements to two months running from the end of the time period for their preparation. In keeping with the new time periods for preparation and approval of the financial statements, it is allowed to file a second corporate income tax self-assessment until November 30, 2020. Additionally, amendments are introduced to the rules on tax deferrals for small and medium-sized companies and the self-employed along with a new stamp tax exemption; and a later date has been determined for publication of the list of delinquent tax payers.

The May 7, 2020 edition of the Official State Gazette published Royal Decree-Law 19/2020, of May 26, 2020, adopting additional measures on farming, scientific, economic, employment-related, social security and tax matters to soften the effects of COVID-19.

Royal Decree-Law 8/2020, of March 17, 2020, introduced extraordinary measures applicable to legal entities governed by private law (article 40) and to procedures of the governing bodies of listed Sociedad Anónima companies (article 41) -see our alert-. Among other measures, it suspended the time periods for preparation of the financial statements and as a result postponed the time periods for their approval. More specifically:

a) It determined suspension of the three-month time period running from the fiscal year end for preparation of the financial statements, which was to recommence for another three months from the end of the state of emergency.

For any financial statements that had already been prepared on the date of declaration of the state of emergency, the period for their verification by auditors was extended until two months after the end of the state of emergency.

Consistently with these provisions, the time periods for annual shareholders’ meetings approving the financial statements to be held were postponed (three months following the end of the period for preparing the financial statements); and if these meetings had already been called before declaration of the state of emergency to be held after that date, the place and time for holding the meeting could be changed or the meeting notice could be withdrawn.

b) For listed companies, (i) the time period for the obligation to publish and send annual financial reports and auditor's reports on the financial statements to the CNMV (Spanish Securities Market Commission) was extended to six months from the fiscal year end and (ii) it allowed annual shareholders’ meetings to be held in the ten month period following the fiscal year end.

Now, Royal Decree-Law 19/2020 states that the three-month period for preparing the financial statements and other documents required by law will start running on June 1, 2020 (not from the end of the state of emergency). Additionally, the time period for approving financial statements is reduced to two months running from the end of the time period for their preparation.

In view of all of these measures, in the tax field the rules on filing corporate income tax returns for fiscal years that commenced in 2019 are amended, where taxpayers’ periods for preparation and approval of their financial statements for the fiscal year have been adjusted to the provisions in the mentioned article 40 and article 41 of Royal Decree-Law 8/2020 (as amended, as we explained, by Royal Decree-Law 19/2020).

More specifically:

a) In the regular filing period (25 calendar days running from six months after the end of the tax period) a “first self-assessment” must be filed.

If by the end of that time period the financial statements have not been approved, this first self-assessment must be based on available financial statements, which are defined as follows:

For listed companies (sociedades anónimas), the audited financial statements referred to in letter a) of article 41.1. of Royal Decree-Law 8/2020. This letter states that:

“1. Exceptionally, in 2020 the following measures will apply to companies with shares admitted for trading on a regulated market in the European Union:

a) The obligation to publish and send their annual financial reports to the CNMV and auditor’s reports on their financial statements may be performed within up to six months after their fiscal year-ends. That time period will be extended to four months for the publication of interim management statements and half-yearly financial reports.

For other taxpayers:
1. Their audited financial statements.
2. Otherwise, the financial statements prepared by the relevant body.
3. In the absence of either of these, the available accounting records kept as a required in the Commercial Code or in the rules governing them.

b) If the relevant self-assessment based on the approved financial statements differs from that filed in the time period mentioned above, a new self-assessment must be filed (the “second self-assessment”) before and including November 30, 2020. In relation to this second self-assessment, it is provided that:

If it shows a greater tax underpayment or a lower tax overpayment, it will be treated as a supplementary return and give rise to late-payment interest though not to surcharges for late filing without a previous request (article 27 of General Taxation Law 58/2003, of December 17, 2003 –LGT-).
In all other cases, the second self-assessment will take effect upon being filed and the provisions in article 120.3 of the General Taxation Law and in articles 126 et seq. of Royal Decree 1065/2007, of July 27, 2007 (correction of returns) will not be applicable. It is expressly stated that the tax authorities’ powers to verify or audit both self-assessments are not limited.

In these cases, the restrictions on correction of election options referred to in article 119.3 of the General Taxation Law will not apply.
If the return shows a tax overpayment, the general refund regime under the tax rules in article 127 of Corporate Income Tax Law 27/2014, of November 27, 2014 will be applicable. The six-month period for refunding the overpaid amount without triggering late-payment interest will run from November 30, 2020.

However, if the return shows a tax overpayment resulting from a payment that was effective on the first return, late-payment interest will accrue from the day following the end of the general voluntary filing period.

c) Filed self-assessments may be verified and audited by the tax authorities; and second self-assessments that do not show a greater tax underpayment or lower tax overpayment than the first self-assessments do not have a precluding effect.

A summary of the other tax measures introduced by Royal Decree-Law 19/2020 is set out below:

1. Tax deferrals for small and medium-sized companies and the self-employed: extension of the time period free of late-payment interest

Royal Decree-Law 7/2020, of March 12, 2020, set out a deferral regime with no guarantees for the tax debts of small and medium-sized companies and the self-employed for a six-month period (see our alert). This regime included assessments and self-assessments with filing and payment periods ending between March 13, 2020 and May 30, 2020, including tax debts that ordinarily are not able to be deferred (withholdings for income in cash and in kind, charged taxes and corporate income tax prepayments), provided they are below €30,000; and no late-payment interest accrues in the first three months of the deferral.

Later, through Royal Decree-Law 11/2020, of March 31, 2020, the regime described above was extended to include customs and tax debts relating to customs declarations, with certain specific provisions (see our commentary). It determined for these cases also that the deferral would not give rise to late-payment interest for the first three months of deferral.

Now the time period free of late-payment interest on these deferrals is increased to four months.

2. New stamp tax exemption

A new stamp tax exemption is introduced for deeds recording the moratorium arrangements under article 13.3 of Royal Decree-Law 8/2020, of March 17, 2020, and in article 24.2 of Royal Decree-Law 11/2020, of March 31, 2020; and for the moratorium arrangements under agreements referred to in article 7 of Royal Decree-Law 19/2020.

3. Later publication of the list of delinquent payers

Article 95 bis of the General Taxation Law requires the tax authorities to order periodical publication of the lists of delinquent payers in respect of tax debts and penalties where they are greater than €1,000,000 and have not been paid after the end of the voluntary payment period (excluding any that were deferred or suspended). Satisfaction of the requirements for including a tax debt or penalty will be determined as of December 31 of the year before the publication order.

The General Taxation Law states that the publication date will be determined by ministerial order, which has to occur, in all cases, in the first six months of each year.

Now it is provided that the publication arising from satisfaction as of December 31, 2019 of the requirements to be included on the list will occur, in all cases, before October 1, 2020.