Tax Advances, Debt Extinction, and Tax Procedures
Tax Advances
Tax advances refer to situations where the tax obligation arises before the taxable event has fully occurred.
- Direct: The taxpayer required to pay coincides with the one making the advance (e.g., installment payments).
- Indirect: The taxpayer making the advance is not the same as the one ultimately liable for the tax (e.g., withholdings, income tax deductions, revenue accounts).
Extinction of Tax Debt
Payment
Payment must fulfill these conditions:
- Identity: Payment must be exactly what is owed.
- Integrity: The debt is considered paid only when the entire amount is settled.
- Indivisibility: The debt cannot be split.
Prescription
Tax debts expire after four years, provided that:
- A certain time has passed.
- The creditor has not exercised their right to claim.
- The debtor has not acknowledged the obligation.
Compensation
The General Tax Law (LGT) allows for tax debts to be extinguished, in whole or in part, by compensation, either ex officio or at the taxpayer’s request. This occurs when two parties are mutually debtors and creditors.
Remission (Condonation)
In exceptional cases, the tax liability may be canceled by law through the Council of Ministers.
Insolvency of the Debtor
Debts will be extinguished when the insolvency of the taxpayer and its directors is proven.
Tax Management Procedures
Self-Assessments
The taxpayer, besides providing the Administration with data to settle the tax, performs the quantification operations necessary to determine the amount of tax to be paid. The process begins with the presentation of the self-assessment and concludes with the payment.
Tax Return
A tax return is any document filed with the tax authorities that acknowledges or establishes the occurrence of any event relevant to the application of taxes.
Tax Management Procedure Through Statement
After receiving the taxpayer’s statement, the authorities must perform the qualification and quantification operations necessary to determine the amount to be paid. This is done through a provisional assessment, notifying the taxpayer within six months.
Data Verification Procedure
This procedure is initiated by the administration to verify the data in the taxpayer’s declaration or to correct arithmetic errors. If the taxpayer disagrees, they will be asked to justify the discrepancy.
Value Checking Procedure
This is the procedure by which the Administration verifies the value declared by the taxpayer for income, products, goods, and other determining factors. The procedure must be completed within six months from the notification of commencement.
Contradictory Expert Valuation: The interested party may request a correction of the assessed values.
Limited Checking Procedure
This procedure allows for the following checks:
- Review of information provided by taxpayers in their statements and supporting documents.
- Review of invoices and record data showing the performance of the taxable event.
However, third parties cannot be required to provide information on financial transactions. The process ends with a resolution including the tax obligation.