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Resolution of 4 April 2016 of the Taxation General Directorate relating to the deductibility of late payment interest in application of the Corporation Tax Act 27/2014, of 27 November (Official State Gazette of 6 April).

Resolución de 4 de abril de 2016

de la Dirección General de Tributos, en relación con la deducibilidad de los intereses de demora tributarios, en aplicación de la Ley 27/2014, de 27 de noviembre, del Impuesto sobre Sociedades.

As a consequence of the doubts arising recently regarding the deductibility of interest on tax arrears, the Tax Agency issues this Resolution, the highlights of which are as follows:

  • The Resolution refers solely and exclusively to the regulations prevailing at the time it is issued, i.e. Act 27/2014 of 27 November on Corporation Tax, and it reiterates the interpretation criteria established in consultations V4080-15 and V0603-16.

  • Interest on tax arrears is classified as financial expenses in the legal sense, taking into account the classification thereof by the Constitutional Courts in sentence STC 76/1990 (compensatory nature of the damages caused by the delay in payment of the tax debt) and the accounting classification.

  • It is not included in any of the categories in article 15 of the Spanish Corporation Tax Act (expenses deriving from the accounting of Corporation Tax, fines or criminal or administrative sanctions and surcharges, donations and unjustified expenses and costs of judicial appeals) and should therefore be deemed deductible.

  • Given its financial nature, this sum is subject to the deduction limits established in article 16 of the Corporation Tax Act (30% of operating profits for the year for net financial expenses of under 1 million euros)

Interest on tax arrears, defined in general terms in article 26 of General Tax Act 58/2003 of 17 December, is called for in several cases, both in the General Tax Act itself (i.e.; article 26.2, governing certain general cases, article 15.3 on the existence of a conflict in the application of tax regulations; article 16.3, on the existence of simulation; article 27, on surcharges for untimely voluntary filing; article 28, on surcharges of the executive period; article 65, on deferrals or payment by instalments; article 180, on cases of sanctions...), and in cases of regulatory laws governing each tax (i.e. any adjustment to a tax incentive unlawfully applied).

Lastly, the Resolution states that interest on arrears that the Tax Agency is obliged to settle to taxpayers shall be treated as financial income and included in the gross tax base of Corporation Tax.