Following the end of this fateful year 2020, Spanish companies are now facing the end of the financial year. They prepare their annual accounts and calculate their income tax (IS). This end of the year will be complicated by the exceptional circumstances caused by the pandemic, let’s see some critical points.
In terms of depreciation, during the closure, many companies had to close and now some of them have opened, closed, reopened and closed again depending on the evolution of the restrictive measures, in order to avoid the spread of coronavirus. What will happen to the depreciation of assets during the periods when the companies were closed? Will they be considered a deductible expense when they have been neither used nor used? Will they be deductible during periods when the company did not generate revenue? Should we adjust asset impairment during closing periods?
Regarding deductible expenses, due to the famous clear correlation between expenses and income, when the company does not generate income, expenses are not deductible, which is very clear about AEAT for inactive companies that are systematically denied the deductibility of expenses, no matter how small It would be. So what will happen to those expenses that have been incurred despite the fact that they are in a situation of closure? Will they be deductible in IS? Will we have to adjust them as a permanent difference? What criteria will be applied in relation to Covid’s accrued expenses for closures? Non-deductible expenses and penalties for those who do not? Adding to the above the expenses generated by non-compliance with ERTE bonuses for subsequent dismissals (the famous non-deductible expenses for “actions contrary to the legal system” of Article 15 of the IS Law).
Another aspect to consider is surplus assets. Many companies have kept the blind for months, and some are still totally or partially closed, especially those related to tourism. In this case, we must decide whether the company’s assets are still related to an economic activity (which does not exist due to the closure) or whether they will be treated as assets not related to the activity. If this happens, we will introduce the so-called “supervisory capital” which occurs when more than 50% of an entity’s assets are not affected by an economic activity. The definition of a wealth company changes depending on the tax in question. IS according to quarterly balances.
Wealth tax is based on compliance with the 90-day period in the fiscal year of the equity conditions. Currently, there are still companies that keep production centers, shops, restaurants or hotels closed due to the lack of demand that makes them viable. “Supervisory capital” causes the loss of tax incentives in SI (15% tax rates, ERD incentives, exemption for dividends and compensation of negative tax bases for listing a few).
It would also be excluded from being considered a family business and therefore its partners would have to pay taxes on the same amount in the property tax or, in case of inheritance or donation, lose the 95% discount. of Inheritance Tax.
And the decision must be made before the next months of June and July when we will file the IS return, personal income tax (self-employed) and wealth tax. On the contrary, AEAT will have 4 years to inspect us and check if we did everything right.
David Jiménez, Raúl Marset and Albert Sagués, partners from RSM Spain