The Constitutional Court has just given an important boost to the Spanish public treasury. This Thursday, the plenary session rejected the question of unconstitutionality raised regarding the regulation of the installments that large companies – those with a turnover exceeding 10 million euros – must pay in corporate tax. The ruling, whose rapporteur was Judge María Luisa Segoviano Astaburuaga, responds to a question raised by the Litigation-Administrative Chamber of the Superior Court of Justice of the Valencian Community and understands that the calculation of these advances does not violate the principle of economic capacity of companies.
The origin of the matter lies in the claim of a large company that believed it had suffered financial harm for having paid in installments an amount greater than that which ultimately led to the final tax settlement. The company argued that this situation violated the principle of economic capacity, since it was forced to advance to the Administration a sum higher than the one actually corresponding according to its final tax obligation.
The Constitutional Court rejects this interpretation and concludes that the method of calculating fractional payments does not tax “unreal” or “fictitious” income, but rather constitutes a reasonable measurement of income in real, net and current terms.
The interim payment scheme consists of applying a rate of 23% to the positive accounting result achieved in the profit and loss account for the first months of the year (three, nine or 11), while the general corporate tax rate is 25%. Subsequently, with the close of the tax year, the accounting result may or may not coincide with the tax base and may even differ significantly, so adjustments are common. However, the high court finds that this result accurately reflects the entity’s profits and serves as an appropriate benchmark for an interim payment.
The ruling highlights that such installment payments have the nature of an autonomous and temporary tax obligation, similar to other advance payments existing in the Spanish tax system, such as those for personal income tax (IRPF). Its function is to advance resources to the Treasury during the year and subsequently adapt them to the final liquidation.
(Breaking news. There will be an extension).
