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Practical Income Manual 2022.

Example: calculation of late payment interest for improper deductions

Don RIT To buy a newly built home off plan, on November 28, 2012, he signed a private purchase and sale contract with the developer "ZZ" in which the following payment schedule was established: A first payment on account of 9,000 euros on the date of signing the private contract and 3 annual payments of 6,000 euros, with the last due on November 5, 2015 and the rest 173,000 euros upon delivery of the home in October 2016 through the subscription of a mortgage loan.

Notwithstanding the above, due to exceptional circumstances not attributable to the taxpayer, the works were stopped and Don RIT proceeded.  to request from the Tax Administration an extension of the four-year period for the completion of the works. This extension was granted for three more years, which is why in 2016, 2017 and 2018 it did not provide any amount or practical deduction.

Once the works were completed in 2019, the public deed of sale was signed on October 14, 2019 and in November of that year, Mr. RIT moved there. However, for economic reasons, on February 1, 2022, he rented it, failing to comply with the requirement that said home constitute his residence for a continuous period of at least three years and, consequently, losing the right to the deductions made.

The amounts invested and the deductions made have been:

Year

Amounts invested

Deductions made

2012 9,000 euros 1,350 euros (15%)
2013 6,000 euros 900 euros (15%)
2014 6,000 euros 900 euros (15%)
2015 6,000 euros 900 euros (15%)
2016 0 0
2017 0 0
2018 0 0
2019 9,040 euros 1,356 euros (15%)
2020 9,040 euros 1,356 euros (15%)
2021 9,040 euros 1,356 euros (15%)

By what amount must the state and regional liquid quota of the 2022 declaration be increased, if said declaration is presented and entered on June 30, 2023 and, in relation to the declarations in which the deduction was made, that of the 2012 financial year? was returned and said return occurred on November 29, 2013, while those for the years 2013, 2014, 2015, 2019, 2020 and 2021 were positive?

Solution:

1. Amount of improper deductions

The taxpayer has failed to comply with the requirement that the home constitute his habitual residence for a continuous period of at least three years.

Consequently, the amount of deductions that must be refunded is:

  • Deduction made in the 2012 declaration: 1,350.00

  • Deduction made in the 2013 declaration: 900.00

  • Deduction made in the 2014 declaration: 900.00

  • Deduction made in the 2015 declaration: 900.00

  • Deduction made in the 2016 declaration: 0.00

  • Deduction made in the 2017 declaration: 0.00

  • Deduction made in the 2018 declaration: 0.00

  • Deduction made in the 2019 declaration: 1,356.00

  • Deduction made in the 2020 declaration: 1,356.00

  • Deduction made in the 2021 declaration: 1,356.00

  • Total 8,118.00

Of the total improper deductions:

  • The sum of the amounts of the deductions made in the returns of 2012, 2013, 2014, 2015, 2019, 2020 and 2021 corresponding to the state section (50% s/8,118.00 = 4,059.00) will increase the state liquid quota,

  • The sum of the amounts of the deductions made in the declarations of 2012, 2013, 2014, 2015, 2019, 2020 and 2021 corresponding to the regional section (50% s/8,118.00 = 4,059.00) will increase the autonomous liquid quota.

To these amounts the corresponding late payment interest must be added, calculated separately for the amounts deducted in each of the years.

2. Default Interest Amount

Warning : p For the calculation of late payment interest for the period from 01-01-23 to 06-30-23, 4.0625 per 100 has been applied, which is the late payment interest rate approved by the Provision Additional forty-second of Law 31/2022, of December 23, on General State Budgets for 2023 (BOE of December 24).

2.1 Late interest corresponding to the improper deduction of 2012 (1,350 euros)

a. Initial period: from 11-30-13 to 12-31-13 (32 days)

It is the period between the day following the date on which the return occurred, which was November 30, 2013, and the last day of said year. The late payment interest rate in force on that date was 5 percent:

  • Late interest: (1,350 x 5 ÷ 100) x 32 ÷ 365 = 5.92

b. Intermediate period: from 01-01-14 to 12-31-22 (3,287 days)

It is the period between January 1, 2014 and December 31, 2022. The default interest rate in force in 2014 was 5 percent, in 2015 it was 4.375 percent and in 2016, 2017, 2018, 2019, 2020, 2021 and 2022 it was 3.750 percent. Therefore:

  • Default interest for 2014: (1,350 x 5 ÷100) = 67.50
  • Late interest for 2015: (1,350 x 4.375 ÷ 100) = 59.06
  • Late interest for 2016: (1,350 x 3.75 ÷ 100) = 50.63
  • Late interest for 2017: (1,350 x 3.75 ÷ 100) = 50.63
  • Late interest for 2018: (1,350 x 3.75 ÷ 100) = 50.63
  • Late interest for 2019: (1,350 x 3.75 ÷ 100) = 50.63
  • Late interest for 2020: (1,350 x 3.75 ÷ 100) = 50.63
  • Late interest for 2021: (1,350 x 3.75 ÷ 100) = 50.63
  • Late interest for 2022: (1,350 x 3.75 ÷ 100) = 50.63
  • Total (67.50+59.06+50.63+50.63+50.63+50.63+50.63+50.63 +50.63 ) = 480.97

c. Final period: from 01-01-23 to 06-30-23 (181 days)

It is the period between January 1, 2023 and the day of submission of the personal income tax return for the year 2023, in this case, June 30, 2023. The default interest rate in force in 2023 is 4.0625 percent.

  • Late interest: (1,350 x 4.0625 ÷ 100) x 181 ÷ 365 = 27.20

d. Total late payment interest corresponding to the deduction for fiscal year 2012.

Total late payment interest: 5.92 + 480.97 + 27.20 = 514.09 euros

2.2. Late interest corresponding to the improper deduction of 2013 (900 euros)

a. Initial period : from 07-01-14 to 12-31-14 (184 days)

It is the period between the day following the expiration date of the declaration period for fiscal year 2013, which was June 30, 2014, and the last day of said year. The current interest rate in this period was 5 percent.

  • Late interest: [(900 x 5 ÷ 100) x 184 ÷ 365] = 22.68

b. Intermediate period : from 01-01-15 to 12-31-22 (2,922 days)

It is the period between January 1, 2015 and December 31, 2022. The default interest rate in force in 2015 was 4.375 percent and in the years 2016, 2017, 2018, 2019, 2020, 2021 and 2022 it was 3.75 percent. Therefore:

  • Late interest for 2015: (900 x 4.375 ÷ 100) = 39.38
  • Late interest for 2016: (900 x 3.75 ÷ 100) = 33.75
  • Late interest for 2017: (900 x 3.75 ÷ 100) = 33.75
  • Late interest for 2018: (900 x 3.75 ÷ 00) = 33.75
  • Late interest for 2019: (900 x 3.75 ÷ 00) = 33.75
  • Late interest for 2020: (900 x 3.75 ÷ 00) = 33.75
  • Late interest for 2021: (900 x 3.75 ÷ 00) = 33.75
  • Late interest for 2022: (900 x 3.75 ÷ 00) = 33.75
  • Total (39.38 + 33.75 +33.75 + 33.75 + 33.75 + 33.75 + 33.75) = 275.63

c. Final period : from 01-01-23 to 06-30-23 (181 days)

It is the period between January 1, 2023 and the day of submission of the personal income tax return for the year 2022, in this case, June 30, 2023. The default interest rate in force in 2023 is 4.0625 percent.

  • Late interest: (900 x 4.0625 ÷ 100) x 181 ÷ 365 = 18.13

Total late payment interest corresponding to the deduction for fiscal year 2013 .

Total late payment interest: 22.68 + 275.63 + 18.13 =316.44 euros

2.3 Late interest corresponding to the improper deduction of 2014 (900 euros)

a. Initial period : from 07-01-15 to 12-31-15 (184 days)

It is the period between the day following the expiration date of the declaration period for fiscal year 2014, which was June 30, 2015, and the last day of said year. The current interest rate in this period was 4.375 percent.

  • Late interest: [(900 x 4.375 ÷ 100) x 184 ÷ 365] = 19.85

b. Intermediate period : from 01-01-16 to 12-31-22 (2,557 days)

It is the period between January 1, 2016 and December 31, 2022. The default interest rate in force in 2016, 2017, 2018, 2019, 2020, 2021 and 2022 was 3.750 percent. Therefore:

  • Late interest for 2016: (900 x 3.75 ÷ 100) = 33.75
  • Late interest for 2017: (900 x 3.75 ÷ 100) = 33.75
  • Late interest for 2018: (900 x 3.75 ÷ 100) = 33.75
  • Late interest for 2019: (900 x 3.75 ÷ 100) = 33.75
  • Late interest for 2020: (900 x 3.75 ÷ 100) = 33.75
  • Late interest for 2021: (900 x 3.75 ÷ 100) = 33.75
  • Late interest for 2022: (900 x 3.75 ÷ 100) = 33.75
  • Total (33.75 + 33.75 +33.75 + 33.75 + 33.75 + 33.75 + 33.75) = 236.25

c. Final period : 01-01-23 to 06-30-23 (181 days)

It is the period between January 1, 2023 and the day of submission of the personal income tax return for the year 2022, in this case, June 30, 2023. The default interest rate in force in 2023 is 4.0625 percent.

  • Late interest: (900 x 4.0625 ÷ 100) x 181 ÷ 365 = 18.13

d. Total late payment interest corresponding to the deduction for fiscal year 2014.

Total late payment interest: 19.85 + 236.25. + 18.13 = 274.23 euros

2.4 Late interest corresponding to the improper deduction of 2015 (900 euros)

a. Initial period : from 07-01-16 to 12-31-16 (184 days)

It is the period between the day following the expiration date of the declaration period for fiscal year 2015, which was June 30, 2016, and December 31, 2016. The default interest rate in force in 2016 was 3.750 percent. Therefore:

Late interest for 2016: [(900 x 3.75 ÷ 100) x 184 ÷ 366] = 16.97

b. Intermediate period : from 01-01-17 to 12-31-22 (2,190 days)

It is the period between January 1, 2017 and December 31, 2022. The default interest rate in force in the years 2017, 2018, 2019, 2020, 2021 and 2022 was 3.750 percent. Therefore:

  • Late interest for 2017: (900 x 3.75 ÷ 100)= 33.75
  • Late interest for 2018: (900 x 3.75 ÷100) = 33.75
  • Late interest for 2019: (900 x 3.75 ÷100) = 33.75
  • Late interest for 2020: (900 x 3.75 ÷100) = 33.75
  • Late interest for 2021: (900 x 3.75 ÷100) = 33.75
  • Late interest for 2022: (900 x 3.75 ÷100) = 33.75
  • Total (33.75 + 33.75 +33.75 + 33.75 + 33.75 + 33.75 ) = 202.50

c. Final period : 01-01-23 to 06-30-23 (181 days)

It is the period between January 1, 2023 and the day of submission of the personal income tax return for the year 2022, in this case, June 30, 2023. The default interest rate in force in 2023 is 4.0625 percent.

  • Late interest: (900 x 4.0625 ÷ 100) x 181 ÷ 365 = 18.13

d. Total late payment interest corresponding to the deduction for fiscal year 2015.

Total late payment interest: 16.97 + 202.50 + 18.13 = 237.60 euros

2.5 Late interest corresponding to the improper deduction of 2016 (no deduction was made)

There is no deduction and therefore there is no improper deduction or late payment interest

2.6 Late interest corresponding to the improper deduction of 2017 (no deduction was made)

There is no deduction and therefore there is no improper deduction or late payment interest

2.7 Late interest corresponding to the improper deduction of 2018 (no deduction was made)

There is no deduction and therefore there is no improper deduction or late payment interest

2.8 Late interest corresponding to the improper deduction of 2019 (1,356 euros)

a. Initial period : from 07-01-20 to 12-31-20 (184 days)

It is the period between the day following the expiration date of the declaration period for fiscal year 2019, which was July 1, 2020, and December 31, 2020. The default interest rate in force in 2020 was 3.750 percent. Therefore:

  • Late interest for 2020: [(1,356 x 3.75 ÷ 100) x 184 ÷ 366] = 25.56

b. Intermediate period : from 01-01-21 to 12-31-22 (730 days)

It is the period between January 1, 2021 and December 31, 2022. The default interest rate in force in 2021 and 2022 was 3.750 percent. Therefore:

  • Late interest for 2021: [(1,356 x 3.75 ÷ 100)] = 50.85
  • Late interest for 2022: [(1,356 x 3.75 ÷ 100)] = 50.85
  • Total (50.85 + 50.85) = 101.70

c. Final period : 01-01-23 to 06-30-23 (181 days)

It is the period between January 1, 2023 and the day of submission of the personal income tax return for the year 2022, in this case, June 30, 2023. The default interest rate in force in 2023 is 4.0625 percent.

  • Late interest: (1.356 x 4.0625 ÷ 100) x 181 ÷ 365 = 27.32

d. Total late payment interest corresponding to the deduction for fiscal year 2019

Total late payment interest: 25.56 + 101.70 + 27.32 = 154.58 euros

2.8 Late interest corresponding to the improper deduction of 2020 (1,356 euros)

a. Initial period : from 07-01-21 to 12-31-21 (184 days)

It is the period between the day following the expiration date of the declaration period for fiscal year 2020, which was June 30, 2021 and December 31, 2021. The default interest rate in force in 2020 was 3.750 percent. Therefore:

  • Late interest for 2021: [(1,356 x 3.75 ÷ 100) x 184 ÷ 365] = 25.63

b. Intermediate period : from 01-01-22 to 12-31-22 (365 days)

It is the period between January 1, 2022 and December 31, 2022. The default interest rate in force in 2022 was 3.750 percent. Therefore:

  • Late interest for 2022: [(1,356 x 3.75 ÷ 100)] = 50.85

c. Final period : 01-01-23 to 06-30-23 (181 days)

It is the period between January 1, 2023 and the day of submission of the personal income tax return for the year 2022, in this case, June 30, 2023. The default interest rate in force in 2023 is 4.0625 percent.

  • Late interest: (1.356 x 4.0625 ÷ 100) x 181 ÷ 365 = 27.32

d. Total late payment interest corresponding to the deduction for fiscal year 2020

Total late payment interest: 25.63 + 50.85 + 27.32 = 103.80 euros

2.10 Late interest corresponding to the improper deduction of 2021 (1,356 euros)

a. Initial period : from 07-01-22 to 12-31-22 (184 days)

It is the period between the day following the expiration date of the declaration period for fiscal year 2021, which was June 30, 2022, and December 31, 2022. The default interest rate in force in 2022 was 3.750 percent.

  • Therefore: • Late interest for 2022: [(1,356 x 3.75 ÷ 100) x 184 ÷ 365] = 25.63

b. Final period : from 01-01-23 to 06-30-23 (181 days)

It is the period between January 1, 2023 and the day of submission of the personal income tax return for the year 2022, in this case, June 30, 2023. The default interest rate in force in said period is 3.75 percent.

Late interest: [(1,356 x 4.0625 ÷ 100) x 181 ÷ 365] = 27.32

c. Total late payment interest corresponding to the deduction for fiscal year 2021

Total late payment interest: 25.63 + 27.32 = 52.95 euros

2.11 Late interest to be computed in the 2022 declaration

  • Corresponding to the improper deduction of 2012: 514.09
  • Corresponding to the improper deduction of 2013: 316.44
  • Corresponding to the improper deduction of 2014: 274.23
  • Corresponding to the improper deduction of 2015: 237.60
  • Corresponding to the improper deduction of 2019: 154.58
  • Corresponding to the improper deduction of 2020: 103.80
  • Corresponding to the improper deduction of 2021: 52.95
  • Total interests: 1,653.69

50 percent of the late payment interest corresponding to the years 2012, 2013, 2014, 2015, 2019, 2020 and 2021 will increase the state liquid quota (826.85 euros) and the remaining 50 percent (826.85 euros) will increase autonomous liquid quota or vice versa.