Paying taxes on time is a fundamental obligation for both individuals and companies in Spain. However, businesses may occasionally face temporary cash flow difficulties, making it challenging to meet their tax obligations without affecting their day-to-day operations.
In such circumstances, the Spanish Tax Office (AEAT – Agencia Estatal de Administración Tributaria) provides a formal mechanism to defer tax payments or spread them over a number of instalments. This mechanism, known as “aplazamiento” (tax deferral) or “fraccionamiento” (payment plan), can be a useful tool, but it is subject to strict conditions and a number of important exclusions that are frequently misunderstood. Understanding both the advantages and the limitations of this mechanism is essential before submitting an application.
What is a Tax Deferral and when can it be requested?
A tax deferral allows a taxpayer to postpone payment of a tax debt beyond its standard due date, subject to approval by the AEAT. An application may be submitted at any time during the voluntary payment period. It is also possible, although less common, to request a deferral after the voluntary payment period has ended, provided that the debt has not progressed to an advanced stage of the enforcement procedure. Once the enforcement proceedings have reached the stage at which a deferral is no longer legally admissible, the application will be rejected.
The key legal requirement is that the taxpayer must demonstrate a temporary inability to pay due to their economic or financial situation. This mechanism is intended to address temporary liquidity difficulties rather than a permanent inability to meet tax obligations.
General Conditions for Approval
Not every application will be approved. The AEAT will assess the application and may approve the application subject to different payment terms or reject it outright. The following are among the principal factors considered by the AEAT:
- The tax return to which the debt relates must have been filed. An application for deferral of an unfiled return will be rejected.
- The taxpayer should generally be up to date with their other tax obligations. Although this is not, in itself, a statutory requirement for approval, outstanding tax debts that are not covered by the application may reduce the likelihood of approval.
- The application must not simply repeat a previously rejected request without any material change in circumstances, as the AEAT may regard this as an attempt to delay payment.
Interest on Deferred Tax Debts
Deferring payment of a tax debt is not free of charge. Interest accrues on the outstanding balance throughout the deferral period.
- For deferrals without a guarantee (see below), the applicable rate is the late-payment interest rate (interés de demora). This rate is reviewed annually in the General State Budget.
- For deferrals secured by a bank guarantee or insurance bond, the lower legal interest rate (interés legal del dinero) applies.
The exact amount of interest depends on the repayment schedule, as interest is calculated on the outstanding balance throughout the deferral period. Even so, tax deferrals often compare favourably with bank financing, as banks typically add arrangement fees and higher spreads on top of the interest rate itself.
Guarantee Thresholds
No guarantee is generally required where the total amount to be taken into account for guarantee purposes does not exceed 50,000 €, calculated by reference to all outstanding deferral requests and existing instalment arrangements at the time the application is submitted. Although all applications remain subject to approval, requests below this threshold are often processed automatically through the AEAT’s online services.
Where the relevant amount exceeds 50,000 €, the taxpayer must provide an acceptable guarantee. The forms of security accepted by the AEAT include:
- A bank guarantee or insurance bond.
- A mortgage or pledge.
- A personal and joint guarantee, or any other form of security that the AEAT considers sufficient where a bank guarantee cannot reasonably be obtained.
Which taxes can be deferred?
As a general principle, tax debts may be eligible for deferral where the statutory requirements are met and no specific exclusion applies.
In practice, Annual Personal Income Tax, Corporation Tax (Form 200) and Wealth Tax are among the taxes that can generally be deferred.
Which taxes cannot be deferred?
Certain tax debts are excluded from the deferral regime because the taxpayer is regarded as holding the funds on behalf of a third party or because the legislation expressly prohibits a deferral.
The principal exclusions include:
- Withholding taxes and payments on account, such as Forms 111, 115 and 123.
- Corporation Tax instalment payments (Form 202).
- Output VAT already collected from customers, subject to the exception described below.
- Tax debts arising from the enforcement of a final administrative or judicial decision where payment had previously been suspended.
The VAT Exception
Although VAT collected from customers cannot normally be deferred, an important exception applies where the customer has not yet paid the relevant invoice. In these circumstances, the taxpayer may request a deferral on the basis that the corresponding funds have not actually been received.
This exception is particularly relevant for businesses experiencing temporary cash flow difficulties due to late-paying customers. Where the statutory conditions are met, it can provide valuable breathing space without the need to seek external finance.
Conclusion
Tax deferrals can be an effective cash flow management tool when used correctly. However, they should not be viewed as an automatic right. The statutory requirements must be met and certain tax debts are expressly excluded from the regime.
It is also important to comply strictly with the agreed payment schedule. Failure to pay an instalment can result in the deferral being cancelled and may lead to the initiation or continuation of enforcement proceedings for the outstanding debt, together with the applicable surcharges and late-payment interest. Ensuring that an application is submitted correctly and that the agreed instalments are paid on time can therefore make the difference between securing additional time to pay and facing enforcement action.
