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Practical Handbook for Companies 2021

A) Calculation of the payment by instalments:article 40.2 of the LIS

Box 01.Basis for payment by instalments

  1. In the case of entities that pay taxes exclusively to the State, this will be taken as the basis for the fractioned payment:

    The full amount of the last tax period for which the tax return deadline expired on the first day of the corresponding month (April, October and December), less deductions and allowances, as well as withholdings and payments on account corresponding to that period, provided that said tax period has been of an annual duration (box "Amount for the year to be paid or refunded" corresponding to the State, of the corporate income tax return form).

  2. Where the last completed tax period is less than one year, the proportional part of the tax liability of previous tax periods shall also be taken into account, up to a period of 12 months.In this case, the basis for the instalment payment shall be determined by the algebraic sum of the instalments of the tax periods concerned.

    If the period covered by the tax periods computed exceeds the minimum of 365 days, the following percentage of the tax period's tax liability shall be taken as the tax liability of the most remote tax period for the purposes of the aforementioned algebraic sum:

    (Days remaining to compute 365 ÷ Length of tax period)× 100

    • A company that starts its activity will not have to submit an instalment payment, as long as it does not choose to do so in the manner provided for in Article 40.3 of the LIS because there is no basis for its calculation.

    • If the last tax period completed lasted less than one year and was the period in which the entity started its activity, the tax liability to be taken as a basis for calculating the instalment payment will be that corresponding to that period, since there is no tax liability from previous tax periods that would allow a 12-month period to be completed and the regulations do not provide for this case to be extended to one year.

  3. The Spanish economic interest groupings and temporary joint ventures covered by the special regime regulated in Chapter II of Title VII of the LIS, will take as the basis for the instalment payment the gross tax liability corresponding to the part of the taxable base corresponding to the non-resident shareholders without a permanent establishment in Spanish territory, less the items mentioned in a) above which, in direct proportion to their percentage shareholding, correspond to the aforementioned shareholders.

  4. In the case of a merger , the basis for the instalment payments corresponding to the first tax period after the transaction has been carried out shall be determined by the algebraic sum of the bases that would have resulted in the transferring companies had the merger not been carried out.

    In other cases, where there is no base tax period or this is the first tax period since the transaction was carried out and the period is less than one year, the data of the immediate preceding tax periods of the transferring companies shall be computed.

    In a transaction of absorption and once the transaction has been carried out, the basis of the fractioned payments of the acquiring company corresponding to the tax period in which the transaction was carried out will be increased by the bases of the fractioned payment of the transferring companies that would have resulted had the transaction not been carried out.Otherwise, in so far as the base tax period does not cover a minimum period of 365 days of the company, the data of the immediate preceding tax periods of the transferring companies shall also be computed after such a transaction has taken place.

  5. In the case of entities that must pay tax jointly to the State and the Provincial Councils of the Basque Country and/or the Community of Navarre, in order to determine the base of the instalments to be paid, where applicable, the boxes corresponding to the "Tax payable or refundable for the year (State and Provincial Councils/Navarre)" of the corporate income tax return form relating to the tax period on account of which the instalment payment is made shall be added together.To the amount thus obtained, the proportion of the volume of transactions carried out in the common territory determined in the last tax return shall be applied.

Box 03.Amount to be paid

It will be the result of applying the percentage of 18 per cent to the amount calculated as the basis for the instalment payment (box [01]) in each of the April, October or December periods.

When the return is complementary to a previous one, from the amount calculated in accordance with the previous paragraph, the amount of the instalment payment paid at the time must be subtracted (box [02]).

The amount to be paid must be expressed to two decimal places.For this purpose, if necessary, it shall be rounded up or down to the nearest cent.In the event that the last figure of the amount obtained as a result of applying the percentage to the base of the fractioned payment is exactly one half of one cent, rounding shall be carried out to the higher figure.

Example:

On 5 July 2021, the Limited Company "T", whose financial year coincides with the calendar year, filed the corporate income tax return for 2020, with a total tax liability of 12,000 euros, without any deduction or allowance having been applied.2,000 in the financial year 2020.The company does not opt to calculate the instalment payment in accordance with the method provided for in Article 40.3 of the LIS, nor is it obliged to calculate it in accordance with that method.

  • Instalment payments due in 2022:

    First payment. First twenty calendar days of April 2022:

    Basis for payment in instalments:(12,000 - 2,000) = 10,000 euros.

    18% of 10,000 euros = 1,800 euros, which, according to form 202, you must pay.

    On 11 July 2022, he files the tax return for 2021, with a total tax liability of 3,000 euros, without any deduction or allowance having been made.The withholding tax borne in the financial year 2021 amounted to EUR 500.

  • Second payment. First twenty calendar days of October 2022.

    18% of (3,000 - 500) = 450 euros, which, according to form 202, must be paid.

  • Third payment. First twenty calendar days of December 2022.

    18% of (3,000 - 500) = 450 euros, which, according to form 202, must be paid.

    Total instalment payments on account of the 2022 settlement made by Company "T":2,700 euros.

    In addition, assuming that the taxable income for the 2022 tax year amounts to 12,000 euros, without any type of deduction or allowance being applicable, and no withholdings or payments on account have been made, the corporate income tax settlement for the 2022 tax period will be as follows (assuming that the general corporate income tax rate of article 29.1 of the LIS is applicable):

    • Full amount = 12,000 x 25% = 3,000 euros.
    • Fee to be paid = 3.000 - 2.700 = 300 euros.

    As can be seen, the amount of the instalment payments is applied for the purposes of calculating the amount to be paid or refunded for the year to which the instalment payment refers (in this case, 2022).