permits the deduction of time-barred fiscal

What should a taxpayer do when they forget to record an expense in a financial year? Can it be deducted in a year after the statute of limitations period of the year in which it accrued?

The General Directorate of Taxes (GDT) as well as the Administrative Courts usually deny the deduction of the expense if it corresponds to a prescribed year, but a recent Supreme Court ruling advocates the deduction of said expense, if there is no lower taxation.

  • As a general principle, income and expenses derived from the economic transactions or events of a company are allocated to the tax period in which their accrual occurs, in accordance with accounting regulations. However, and exceptionally, the deduction of expenses imputed, for accounting purposes, in a tax period after that in which their temporary imputation is appropriate is allowed, if this does not result in lower taxation than that which would have corresponded by application of the general principle of accrual.
  • The GDT considers that, to assess whether lower taxation occurs, the possible effect of the prescription must be considered. Regarding the right of the Administration to determine the tax debt through the appropriate settlement in four years, counting from the day following the day on which the regulatory period for submitting the corresponding declaration ends. In other words, if the expense that the taxpayer intends to deduct belongs to a year in which the Administration’s right has already expired, the taxpayer cannot deduct the expense either in the accrual year in which it was forgotten or in the year in which it is accounted.
  • The Supreme Court (STS 1625 / 2024 03/22/2024) departs from the GDT doctrine and establishes as an interpretative criterion that it is appropriate to deduct an expense recorded incorrectly in a year subsequent to that in which it accrued, in accordance with the accounting regulations, provided that the allocation of the expense in the subsequent year does not entail a lower taxation, with respect to that which would have corresponded by application of the general regulations of temporary imputation, despite the fact that the year in which the aforementioned expense was accrued was time-barred.
  • As a basis, the court argues that a rule with the force of law, such as the Corporate Tax Law, allows the deduction of an expense in a year after its accrual, as well as the accounting rules. Likewise, and due to the principle of tax reserve, it is not possible to add requirements not provided for in the Corporate Tax regulations, which regulate the requirements for the expense deduction.

Publicado el 05-2024 por PBS