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Practical Handbook for Companies 2021

Temporary negative adjustments originating in previous years

In the event that the taxpayer has to make a correction to the Profit and Loss Account result that entails a negative temporary adjustment originating in previous years, when filling in the corresponding box on pages 12 and 13, the breakdown box "Details of the corrections to the profit and loss account result (excluding the correction for Corporation Tax)" on page 19 of form 200 will be shown simultaneously in the Companies WEB form on page 19 of form 200.This information, once completed, shall be grouped in the detailed table on pages 26a to 26e of Form 200.

In this case, the box corresponding to decreases in temporary adjustments arising from prior years in the Corrections for the financial year part of the table should be completed.

Likewise, the box at Future decreases of temporary corrections in the columns corresponding to "Balance outstanding at the beginning of the year" and "Balance outstanding at the end of the year" should be completed because the positive adjustment at source reverses through negative off-balance sheet adjustments, leading to future decreases in the tax base.With regard to the box at Future decreases in the column "Balance outstanding at the beginning of the tax year", the same amount should be filled in at as was entered in the box at Future decrease in the column "Balance outstanding at the end of the tax year" of the settlement of the previous tax period. In addition, for the column "Balance outstanding at year-end" the box for future decreases should be completed. The balance of this box will decrease until it becomes zero, when it has been fully reversed.

Therefore, during the tax periods in which the Correction reverts because it has its origin in previous years, in the part of the table corresponding to the "Balance pending at the end of the year", the box Future decreases of Temporary corrections will decrease its value with respect to the Balance of the previous year by the amount of the negative correction of this year.For this purpose, the "Balance outstanding at year-end", shall reflect the total amount to be reversed in subsequent years.As this balance is included in the part of future decreases, it indicates that this amount is reversing through negative off-balance sheet adjustments.

Example:

Starting from the example given in the assumption of a positive temporary adjustment arising in the year, we continue with the years 2023 to 2029.

Company "C" has acquired new machinery for 200,000 euros.The acquisition takes place on 1 January 2021, the date on which these elements are placed at the disposal of Company C and become operational.Company C's financial year coincides with the calendar year.The residual value of the items is estimated to be insignificant, so that the depreciable value coincides with the acquisition price.

Depreciation is calculated by applying a coefficient of 50 per cent, which is estimated by the company as the effective depreciation of these items.Company C decides to depreciate the machinery for tax purposes in accordance with the table contained in art. 12.1.a) of LIS, i.e. it will apply a coefficient of 12 percent.

In application of the provisions of art. 12.1 of the LIS, the following adjustments will have to be made in the boxes [00303] and [00304] "Differences between accounting and tax depreciation (art. 12.1 LIS)" on page 12 of form 200:

Financial yearAccounting depreciationTax depreciationCorrectionForm 200Balance at year-end
2021 200.000 x 50% = 100.000 200.000 x 12% = 24.000 76,000 [00303] -76,000.00
2022 200.000 x 50% = 100.000 200.000 x 12% = 24.000 76,000 [00303] -152,000.00
2023 --- 200.000 x 12% = 24.000 -24,000 [00304] -128,000.00
2024 --- 200.000 x 12% = 24.000 -24,000 [00304] -104,000.00
2025 --- 200.000 x 12% = 24.000 -24,000 [00304] -80,000.00
2026 --- 200.000 x 12% = 24.000 -24,000 [00304] -56,000.00
2027 --- 200.000 x 12% = 24.000 -24,000 [00304] -32,000.00
2028 --- 200.000 x 12% = 24.000 -24,000 [00304] -8,000.00
2029 --- 8,000 -8,000 [00304] 0.00

Total tax depreciation = 24.000 x 8 + 8.000 = 200.000

Total book depreciation = 100.000 + 100.000 = 200.000

The tax adjustment to be made by Company "C" to determine the taxable base for corporation tax corresponding to 2023 (to be entered in box [00304]) will be as follows:

Accounting depreciationTax depreciationDecrease in the result
of the profit and loss account
0 200.000 x 12% = 24.000 24,000

In the fiscal year 2023, the machinery is depreciated for accounting purposes, therefore, a negative off-balance sheet adjustment is generated, which should be entered in the box [00304] of decreases, as a consequence of the reversal of the positive adjustment, for the amount of the tax depreciation, i.e. for the value of EUR 24,000.This is a Correction negative temporary correction from previous years.

In the Companies WEB form, in the period 2023, when box [00304] is to be completed, the table on page 19 of form 200 will be displayed and the box for Decreases in "Temporary corrections originating in previous years" must be completed in the part of the table dedicated to "Corrections for the financial year" for an amount of 24,000 euros.The form shall transfer the completed information to box [02568] "Temporary (originating in previous years)" on page 26a of Form 200.

In the table on page 19, the part relating to "Balance outstanding at the beginning of the financial year" should also be completed at. As this is a positive adjustment at source , the box at Future decreases of Temporary corrections should be completed for the amount of 152,000 euros as this is the value of the future decrease box in the column "Balance outstanding at year end" of year 2022, i.e. the accumulated 2021 and 2022.

For the part corresponding to "Balance outstanding at year-end", as this is a positive adjustment at source , the box future decreases should be filled in at Temporary corrections for 128,000 euros (152,000 - 24,000) which is the balance outstanding at the beginning of the year reduced by the reversed amount of 24,000 euros in the financial year 2023.The form shall transfer the completed information to box [02570] "Balance outstanding at the end of the financial year" on page 26a of Form 200.

Details of corrections to the profit and loss account (excluding the correction for IS) (page 19 of Form 200)

Total --- 152,000 --- 24,000 --- 128,000
2023 fiscal year
tax adjustments
Balance outstanding at
principle of exercise
Exercise correctionsBalance outstanding end
of exercise
Future increasesFuture decreasesIncreasesDecreasesFuture increasesFuture decreases
Permanent corrections --- --- --- --- --- ---
Temporary adjustments with origin
in the exercise
--- 152,000 --- --- --- 128,000
Temporary adjustments with origin
in previous years
--- 24,000

Table of details of corrections to the profit and loss account result (excluding adjustment for IS) (pages 26a to 26e of Form 200)

Detail of adjustmentsTipoOutstanding balance
at the beginning of the year
Exercise correctionsOutstanding balance
at the end of the financial year
PermanentTemporary
(origin in the exercise)
Temporary
(originating in exercises
previous)
Differences between book depreciation
and tax (art. 12.1 LIS)
INCREASE --- --- --- --- ---
Differences between book depreciation
and tax (art. 12.1 LIS)
DISMINUCIÓN [02569] 152.000 --- --- [02568] 24.000 [02570] 128.000

In the financial years from 2024 to 2028, the adjustments will be the same as for 2023, with the difference that the "Balance outstanding at year-end", in the box Future decreases of Temporary corrections, its amount will decrease in each financial year at a rate of 24,000 euros each year, until it reaches 8,000 euros in 2028.

In the financial year 2029, in the Companies WEB form, when the box [00304] is to be filled in, the box on page 19 of form 200 will be displayed and the box Decreases of "Temporary corrections with origin in previous financial years" in the part of the box dedicated to "Corrections of the financial year" should be filled in for the amount of 8,000 euros, as this is amount pending tax depreciation.The form shall transfer the completed information to box [02568] "Temporary (originating in previous years)" on page 26a of Form 200.On the other hand, with regard to the part corresponding to "Balance outstanding at year end", the box Future decreases of Temporary corrections should be filled in for 0 euros (8.000 - 8.000), as there is no balance outstanding due to the fact that in this financial year the 8.000 euros that remained as outstanding balance in 2028 have been reversed.The form shall show 0 in box [02570] "Balance outstanding at year-end" on page 26a of Form 200.

Details of corrections to the profit and loss account result (excluding adjustment for IS) (page 19 of Form 200)

Total --- 8,000 --- 8,000 --- ---

2029 fiscal year
tax adjustments

Balance outstanding at
principle of exercise
Exercise correctionsBalance outstanding end
of exercise
Future increasesFuture decreasesIncreasesDecreasesFuture increasesFuture decreases
Permanent corrections --- --- --- --- --- ---
Temporary adjustments with origin
in the exercise
--- 8,000 --- --- --- ---
Temporary adjustments with origin
in previous years
--- 8,000

Table of details of corrections to the profit and loss account result (excluding adjustment for IS) (pages 26a to 26e of Form 200)

Detail of adjustmentsTipoOutstanding balance
at the beginning of the year
Exercise correctionsOutstanding balance
at the end of the financial year
PermanentTemporary
(origin in the exercise)
Temporary
(originating in exercises
previous)
Differences between book depreciation
and tax (art. 12.1 LIS)
INCREASE --- --- --- ---
Differences between book depreciation
and tax (art. 12.1 LIS)
DISMINUCIÓN [02569] 8.000 --- --- [02568] 8.000 [02570] 0