To address the analysis of the accounting aspects of Corporation Tax we must take into account what is established in article 10 of Law 43/1995 on Corporation Tax:
Article 10. Concept and determination of the tax base.
- The taxable base will be constituted by the amount of the rent in the tax period reduced by the compensation of negative taxable bases of previous years. with the provisions of the General Tax Law. In the direct estimation regime, the tax base will be calculated correcting, through the application of the precepts established in this Law, the accounting result determined in accordance with the standards provided in the Commercial Code, in the other Laws related to said determination and in the dispositions that are dictated in development of the mentioned norms.
Thus, for tax purposes, the accounting result must be corrected by applying the appropriate legal provisions to determine the tax base of the tax. In other words, there are obviously differences between accounting and tax criteria.
Let's see below the basic concepts that are evident when comparing accounting and tax regulations:
Temporary differences (Dt): those that appear in one exercise and are compensated in one or more subsequent exercises.
Permanent differences (Dp): those that appear in one exercise and do not affect the following exercises.
Negative tax base compensation (BIn): losses generated in one year that can be offset, for tax purposes, in the following years.
Accrued income tax (Id): amount determined by applying accounting principles and standards and considered as an expense for the year.
Tax on profits to pay (Ip): amount determined by applying the tax regulations and which in no case constitutes a deductible expense.
Economic result (RE): balance of the “Profit and Loss” account before allocating the corresponding accrued tax.
Adjusted accounting result (RCa): obtained using the following algorithm
RCa = RE +/- Dp
Gross tax (IB): obtained using the following algorithm
IB = Ti x RCa
Ti being the applicable tax rate in each case.
From this it follows that the tax accrued will be:
Id = IB - Bonuses - Deductions
Taking into account that the amount of the bonuses and deductions will be those that correspond to each year, without considering the application limits contained in the tax regulations.
Once the basic concepts are presented, we will comment on the main accounts that include the tax effect, according to the latest modifications to the General Accounting Plan (PGC) introduced by the Institute of Accounting and Accounts Auditing (ICAC).
Accounts
470. Public Treasury, debtor for various concepts.
4709. Public Treasury, debtor for tax refund.
473. Public Treasury, withholdings and payments on account.
4730. Public Treasury, withholdings.
4731. Public finance, payments on account of the Corporation Tax.
474. Advance income tax and loss compensation.
4740. Advance income tax.
4745. Credit for losses to compensate for the year….
4746. Credit for pending deductions for the year….
475. Public Treasury, creditor for tax purposes.
4752. Public Treasury, creditor for Corporation Tax.
479. Deferred income tax.
4791. Deferred income tax.
63. TAXES
630. Income tax.
633. Negative adjustments in income tax.
636. Tax refund.
638. Positive adjustments in income tax.
Use of accounts
- Public Treasury, debtor for tax refund.
This account will collect, where appropriate, the amount of the negative differential fee. In other words, the difference in excess between the sum of the withholdings withheld and the payments on account made over the net installment for the current year.
Public Finance, withholdings.
This account will include the amount of withholdings incurred during the current financial year on income from movable capital and, where appropriate, on property leases.
- Public Treasury, payments on account of corporation tax.
This account will include the amount of income on account made during the current year in application of current tax regulations.
- Advance income tax.
This account will collect the excess payable tax (tax) over the accrued tax (accounting).
It is charged when positive temporary differences have occurred in the current year.
It is paid when negative temporary differences from previous years appear in the current year.
- Credit for losses to compensate for the year….
This account will include the amount of the reduction in income tax payable in the following years derived from the existence of negative tax bases pending compensation.
It is loaded when the current exercise has produced a negative tax base.
It is paid when it is compensated in the following exercises .
- Credit for pending deductions for the year….
In this account, which is not defined in the PGC, the amount of deductions pending application will be collected , for exceeding the limits imposed by tax regulations.
It is charged when in the current year there has been a deduction not applicable for exceeding its amount of the limits set by current tax regulations.
It is paid when it is imputed or applied in the following exercises .
- Public Treasury, creditor for corporation tax.
This account will collect the amount of the income tax payable (fiscal) determined from the economic result by applying fiscal criteria.
- Deferred income tax.
This account will collect the excess of the accrued income tax (accounting) over the income tax payable (tax).
It is paid when negative temporary differences have occurred in the current year.
It is charged when in the fiscal year positive temporary differences appear from previous fiscal years.
- Imposition over benefits.
This account will collect the amount of accrued income tax (accounting) determined by applying economic and accounting criteria.
- Negative adjustments in profit tax.
This account will include the decrease, known during the year, of the advance tax or the tax credit for losses to be compensated. Likewise, the increase, also known in the year, of the deferred income tax will be included in this account.
- Positive adjustments in taxation of profits.
This account will include the increase, known during the year, of the advance tax or the tax credit for losses to be compensated. Likewise, the decrease, also known in the year, of the deferred income tax will be included in this account.
Despite belonging to Group 6. Purchases and expenses, this account will present a credit balance and, therefore, it will be regularized by paying said balance to account 129. Profit and Loss.
Differences between accounting and tax regulations
From everything discussed so far, it follows that there are numerous differences between the principles that govern the accounting field and those that govern the tax field. Below we detail the main differences.
- Expenses modified by the tax regulation.
1.1. Amortization.
Property, plant and equipment (article 11.1).
Accelerated. Freedom of amortization (article 11.2).
Assignment contracts with purchase or renewal option (article 11.3).
Goodwill (article 11.4).
Transfer rights (article 11.4).
Trademarks and other property, plant and equipment (article 11.5).
1.2. Provisions.
For depreciation of Editorial Funds (article 12).
For insolvencies (article 12.2).
For depreciation of shares that are not listed on an organized market
(article 12.3).
For depreciation of fixed income securities that are listed on an organized market (article 12.4).
For risks and expenses (article 13.1).
For responsibilities (article 13.2).
For extraordinary repairs (article 13.2).
For expenses derived from sales, guarantees and revisions (article 13.2).
Endowments to the Reversal Fund (article 13.2).
Technical provisions of insurance entities (article 13.2).
Technical Provisions of the Mutual Guarantee Societies (article 13.2).
Allocations to pension funds (article 13.3).
- Non-deductible accounting expenses.
2.1. All societies.
Remuneration of own funds (article 14.1).
Corporation Tax (article 14.1).
Fines and penalties (article 14.1).
Game losses (article 14.1).
Donations and liberalities (article 14.1).
Allocations to internal funds (article 14.1).
Expenses in tax havens (article 14.1).
Undercapitalization (article 20).
2.2. Exempt entities.
Expenses of own activities (article 135.2).
Income application (article 135.2).
Excess value attributed to work benefits (article 135.2).
- Tax deductible items that are not accounting expense.
Endowment to the Social Benefit Work of the Savings Banks (article 22).
- Accounting income that is not taxable.
4.1. Exempt entities.
Income obtained (article 9).
4.2. Reciprocal Guarantee Societies.
Subsidies (article 13.2).
Income derived from the subsidies received (article 13.2).
4.3. Cooperative societies.
Transmission of elements related to the education and promotion fund.
Income obtained from the allocation of assets and rights of the Agrarian Chambers.
4.4. Other companies.
Extraordinary income derived from inflationary processes (article 15.1).
Income derived from the transfer of investments affected by the Social Benefit Work of the Savings Banks (article 22.2).
Income obtained by Companies and Venture Capital Funds (article 69).
Income obtained by Regional Industrial Development Societies (article 70).
Certain dividends and profit shares of transparent companies (article 75.5).
Some dividends and profit shares of companies under international tax transparency (article 121.8).
Extraordinary income reinvested in small companies (article 127).
Income obtained by partially exempt entities (article 132).
Aid for Community fisheries and agricultural policy (Additional provision eleven).
Some income obtained by the Foundations and other entities covered by Law 30/1994.
- Tax revenues that are not accounting.
Recovery of the value of the assets acquired from a related entity that once made a deductible value correction when determining its tax base (article 19.6).
Loss suffered in the transfer of assets that are acquired again within six months from the date of the transfer (article 19.6).
Imputation of tax bases from transparent companies (article 75.2).
Imputation of income in companies subject to the international tax transparency regime (article 121.1).
- Different evaluation criteria.
Accounting revaluations that are not included in the tax base (article 15.1).
Tax valuation at normal market price (articles 15.2, 17.1 and 17.2).
Related-party transactions (article 16).
Raising to full liquid remuneration (article 17.3).
- Temporary imputation differences.
Accounting for income and expenses in a different year to achieve the true image of the company's assets and its operations (article 19.2).
Income obtained from operations with deferred price (article 19.4).
Extraordinary reinvested income (article 21).
PRACTICAL CASES (VerPDF)
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