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Practical Handbook for Companies 2021

Temporary positive adjustments originating in the financial year

In the event that the taxpayer has to make an adjustment to the profit and loss account result that entails a positive temporary adjustment to the accounting result originating in the financial year, on completing the corresponding box on pages 12 and 13, the breakdown box "Details of adjustments to the profit and loss account result (excluding the adjustment for Corporation Tax)" on page 19 of form 200 will be shown simultaneously in the Companies WEB form.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 "Increases in temporary corrections arising in the financial year" in the part of the table on page 19 of Form 200 devoted to "Corrections for the financial year" should be completed. In addition, the box for future decreases in temporary adjustments in the row for "Balance outstanding at year-end" should also be completed. The reason is that, although it is a positive adjustment at source, it will revert through negative off-balance sheet adjustments, which means that this positive temporary adjustment at source in the year will entail future decreases in the tax base, therefore, in the column "Balance outstanding at year-end", the box for decreases must be completed, so that year by year the balance increases if the adjustment continues to be at source or decreases if the adjustment has begun to revert, but always in the column "Future decreases". Once the first tax period in which the adjustment is made has elapsed, in the following settlements the box at future decreases in the column "Balance outstanding at the beginning of the year" should be completed for the same amount as was entered in the box at future decrease in the column at "Balance outstanding at the end of the year" of the settlement of the previous tax period.

In view of the above, during the tax periods in which the correction originates in the year itself, in the part of the table corresponding to "Balance outstanding at year-end", the box future decreases in temporary corrections will increase its value with respect to the balance of the previous year by the amount of the positive correction of this year.As a result, the "Balance outstanding at year-end" will reflect the total amount to be reversed in subsequent years through negative off-balance sheet adjustments.

Example:

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 depreciates 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 per cent.

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 for financial years 2021 to 2029.

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 book depreciation = 24.000 x 8 + 8.000 = 200.000

Total tax depreciation = 100.000 + 100.000 = 200.000

The tax adjustment to be made by Company "C" to determine the taxable income for corporation tax in 2021 (box [00303]) will be as follows:

Accounting depreciationTax depreciationIncreased performance
of the profit and loss account
200.000 x 50% = 100.000 200.000 x 12% = 24.000 76,000

In the fiscal year 2021, as the accounting depreciation practised in the fiscal year by the taxpayer is higher than the tax depreciation allowed according to the provisions of article 12.1 of the LIS, the amount of this excess difference must be entered in the box [00303] "Differences between accounting and tax depreciation (art. 12.1 LIS)" of increases, specifically, in 2021 a positive extra accounting adjustment must be made in the amount of 76,000 euros.A positive temporary adjustment arising in the year has been generated.

Likewise, when the machinery in subsequent tax periods is depreciated for accounting purposes, the amount of the negative adjustment from previous years should be entered in the box [00304] "Differences between accounting and tax depreciation (art. 12.1 LIS)" of decreases, as a consequence of the reversal of the positive adjustment.The value to be included in this box is the amount of tax depreciation.

In the Companies WEB form, in the period 2021 when box [00303] is to be completed, the table on page 19 of form 200 will be displayed and the box Aumentos de "Correcciones temporarias con origen en ejercicio" must be completed in the part of the table dedicated to "Correcciones del ejercicio" for an amount of 76,000 euros.The form shall place the completed information in box [02562] "Temporary adjustments for the financial year (arising in the financial year)" on page 26a of Form 200.Also, in the table displayed on page 19 of Form 200, the part corresponding to "Balance outstanding at the end of the financial year" should be completed. Furthermore, as we are dealing with a positive adjustment at source , the box future decreases of Temporary corrections should be completed for 76,000 euros, as this positive temporary difference at source will revert through negative extra-accounting adjustments and will entail future decreases in the tax base.In order to fill in the box for future decreases in the row corresponding to "Balance to be corrected at year-end", you should go to box [00304] on page 12 of form 200 to display the part of the table relating to decreases.The form shall transfer the amount to box [02570] "Amount 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 --- --- 76,000 --- --- 76,000
2021 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
--- --- 76,000 --- --- 76,000
Temporary adjustments with origin
in previous years
--- ---

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 --- --- [02562] 76.000 --- ---
Differences between book depreciation
and tax (art. 12.1 LIS)
DISMINUCIÓN --- --- --- --- [02570] 76.000

In the fiscal year 2022, the tax adjustment to be made by Company "C" to determine the taxable base for corporate income tax (box [00303]) will be as follows:

Accounting depreciationTax depreciationIncreased performance
of the profit and loss account
200.000 x 50% = 100.000 200.000 x 12% = 24.000 76,000

In the Companies WEB form, in the period 2022, this adjustment will continue to be a positive temporary correction with origin in the financial year, therefore, in the same way as in 2021, when the box [00303] is to be filled in, the box on page 19 of form 200 will be displayed and the box of increases from "Temporary corrections with origin in the financial year" of the part of the box dedicated to "Corrections of the financial year" for an amount of 76,000 euros must be filled in.The form shall transfer the amount to box [02562] on page 26a of Form 200.Likewise, in the table on page 19, the part corresponding to "Balance outstanding at the beginning of the year" should be completed. As this is a positive adjustment at source, the box future decreases of Temporary corrections should be completed for the amount of 76,000 euros, as this is the value of the future decrease box in the Balance outstanding at the end of the year column for the 2021 financial year.

For the part corresponding to "Balance outstanding at year-end", as this is a positive adjustment at source , the box future decreases of Temporary corrections should be completed because this positive temporary difference at source will be reversed by negative off-balance sheet adjustments and will result in future decreases in the tax base.152,000 (76,000 + 76,000), which is the accumulated balance for 2021 and 2022.The form shall transfer the amount to box [02570] "Amount outstanding at the end of the financial year" 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 --- 76,000 76,000 --- --- 152,000
2022 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
--- 76,000 76,000 --- --- 152,000
Temporary adjustments with origin
in previous years
--- ---

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 --- --- [02562] 76.000 --- ---
Differences between book depreciation
and tax (art. 12.1 LIS)
DISMINUCIÓN [02569] 76.000 --- --- --- [02570] 152.000