By means of Legislative Decree No. 643 dated May 14, 2020, the “TEMPORARY LAW TO FACILITATE THE VOLUNTARY FULFILLMENT OF TAX OBLIGATIONS UNDER THE NATIONAL EMERGENCY OCCASIONED BY THE COVID-19 PANDEMIC” was approved, which we will hereinafter refer to simply as the “temporary law“, which was published in the Official Bulletin No. 98, Volume 427, dated May 15, 2020.
This transitional law was passed in response to the presidential veto of Legislative Decree No. 635 dated April 30, 2020, which incorporated a series of extensions and other benefits for the fulfillment of substantive and formal tax obligations. The content of this new transitional law has been summarized in the following points:
1. INCOME TAX
1.1 Extension for filing and payment
All income taxpayers are granted a period ending on 30 June 2020 to file a return and pay the above-mentioned tax, corresponding to the 2019 tax year, free of interest, surcharges and fines, in the following cases:
a) Submit the filing and payment of the tax, for not having complied with the aforementioned obligation within the legal deadline, which expired on 30 April 2020.
b) Present the modification of the corresponding filing, because the original filing was presented (in time or extemporaneously), in which a balance in favor or a lower amount than the corresponding one was determined, with the purpose of making the liquidation and payment of the tax that legally corresponds, without interest, surcharges and fines.
c) Request authorization for payment in instalments, free of interest, surcharges and fines, because the filing was submitted within the legal deadline, but without requesting payment in instalments.
d) The taxpayers who presented the tax return, requesting payment in installments, will be exempt from interest, surcharges and fines for the installments pending payment, and may request an extension of the deadline in accordance with the number of installments granted by the referred to transitional law, free of interest, surcharges and fines.
In the latter case, we will later explain in more detail that the interest, surcharges and fines paid for compliance with these tax obligations may be credited against the payment of Income Tax and CEGC for the tax year 2020.
1.2 Authorization for payment by instalments
The request for payment by instalments free of interest, surcharges and fines shall be submitted to the Directorate-General of the Treasury (DGT), which shall issue the corresponding decision, in accordance with the following rules:
a) Medium Taxpayers, Other Taxpayers and Non-Taxpayers VAT: up to a maximum of seven installments will be authorized, and the first installment of 10% of the liquidated tax must be paid in the month of June 2020.
b) Large Taxpayers: Up to a maximum of four installments will be authorized, and the first installment of 30% of the tax liquidated will have to be cancelled in the month of June 2020.
1.3. Compliance with decisions on payment in instalments
a) Issuance of Tax Authorization: As to the issuance of solvency and tax authorizations, regulated in Article 219 of the Tax Code, the DIRECTORATE GENERAL OF INTERNAL TAXES (DGII) shall issue tax authorizations to the taxpayers who avail themselves of the benefits of the temporary law, provided that they do not fail to comply with the resolutions for payment in due time. The expiration of the tax authorization shall be the date of payment of the next installment.
b) Payments made after the effective date of the transitional law: These payments shall enjoy the benefits until the last working day of the period granted; but the DGT may renew them, when circumstances so warrant.
c) Non-compliance with the obligation to declare and pay within the granted deadlines: This circumstance will cause the benefits to lapse, and collection management will begin, plus the application of fines and interest.
d) Control of tax benefits: The DGII, DIRECTORATE GENERAL OF CUSTOMS (DGA) and DGT will issue the necessary regulations for the control of the filings and payments in installments; in addition to the exercise of the auditing power.
1.4 Non-requirement of guarantees
A bond, surety or guarantee in favor of the Tax Administration shall not be required to access the benefit of payment in installments, regardless of the amount of the tax to be paid.
2. SPECIAL CONTRIBUTION TO MAJOR CONTRIBUTORS TO THE PUBLIC SAFETY PLAN (CEGC by its Spanish acronym)
2.1. Extension for filing and payment
Taxpayers liable to pay the Special Contribution to Large-Scale Taxpayers for the Citizen Security Plan (CEGC) are granted a period ending on 30 June 2020 to comply with the obligation to declare and pay the aforementioned tax, corresponding to the 2019 tax year, free of interest, surcharges and fines, in the following cases:
a) Present the filing and payment of the tax, for not having complied with the aforementioned obligation within the legal deadline, which expired on 30 April 2020.
b) Present the modification of the corresponding filing, because the original filing was presented (in time or extemporaneously), in which a lower amount than the corresponding one was determined, in order to carry out the liquidation and payment of the tax that legally corresponds.
3. WHOLE PAYMENT ON ACCOUNT OF INCOME TAX
a) Medium Taxpayers and Other Taxpayers: They are exempt from paying the Income Tax Advance on Account, corresponding to the monthly periods of April, May and June 2020. However, the obligation to file the return must be complied with, and the Income Tax withholdings must be paid within the corresponding legal period.
b) Large Taxpayers: Yes, they must present the corresponding filings, together with the entire payment on account and the income tax withholdings, within the corresponding legal period.
4. FILING OF AMENDED TAX RETURNS THAT REDUCE THE EXCESS OF THE TAX DETERMINED
No fines shall be imposed on taxpayers who – prior to the effective date of the transitional law – filed returns determining surplus tax, and who, within the term expiring on June 30, 2020, file the corresponding amending return that reduces the declared surplus or excess.
5. EXTENSION FOR THE FULFILMENT OF FORMAL OBLIGATIONS
5.1 Extension for the presentation of the Balance Sheet and Income Statement
a) Medium-sized Taxpayers and Other Taxpayers: they may present, until 30 June 2020, the F-971 Report on the General Balance Sheet for the closing of the fiscal year and the Income Statement, for taxpayers who keep formal accounts.
b) Large Taxpayers: They must present the aforementioned Report F-971; unless said taxpayers are obliged to appoint a Fiscal Auditor, and have informed of said appointment, in which case they are not obliged to present the aforementioned report, in accordance with the provisions of Article 91 of the Tax Code.
5.2 Extension to appoint tax auditor for the tax year 2020
An extension without penalty is granted until July 31, 2020, for the appointment of a tax auditor for the tax year 2020. It is clarified that this extension applies only to those taxpayers who are obliged to issue a tax opinion, having obtained as of December 31, 2019, total assets of USD $1,142,857.12; or, a total income of more than 4,817 minimum wages, excluding the other cases in which a tax opinion must be issued.
5.3 Extension for presentation of the tax report and opinion for the 2019 financial year
The tax opinion and report for 2019, with accompanying documentation, may be submitted until 31 July 2020, without the imposition of fines.
5.4 Extension for compliance with other formal obligations (March to July 2020)
The period for compliance with other formal obligations not expressly regulated in the transitional law, relating to internal and customs taxes that expire in the months from March to July 2020, is extended for a period of two months, starting from the expiry of the ordinary legal period.
6. EXEMPTION FROM FINES, INTEREST AND SURCHARGES
6.1 Exemption from fines, interest, and surcharges for late payment of income tax, including the following:
a) Filing and payment of the tax.
b) Filing without payment or request for authorization of payment in instalments; and
c)Application for authorization to pay in instalments.
6.2 Exemption from fines, interest, and surcharges for late compliance with the CEGC, including the following:
a) Filing and payment of the tax; and
b) Filing without payment.
6.3 Exemption from fines for untimely compliance with formal obligations, which were carried out after April 30, 2020 and until the entry into force of the transitional law.
7. EXEMPTION FROM THE COMPENSATION BOND FOR THE CONTAINMENT OF THE COVID -19
Income is declared not taxable with Income Tax, the compensation bonus for the containment of COVID-19, granted by the Government of the Republic through Article 14, of Executive Decree in the Health Branch No. 14, on “Extraordinary prevention and containment measures to declare the national territory as an area subject to health control, in order to contain the COVID-19 pandemic”, dated March 30, 2020.
8. HOLDING MEETINGS AND GENERAL ASSEMBLIES BY VIDEOCONFERENCE
Meetings and General Assemblies of all types of legal entities may be held by videoconference, applying the provisions of the second and third paragraphs of Article 258 of the Commercial Code. In addition, the corresponding public registers and the National Printing Office shall be open to the public for the registration and publication of the respective documents or shall provide the electronic means for those purposes.
9. ON BENEFITS GRANTED IN OTHER SPECIAL LAWS
The taxpayers included in the “Special and Transitional Law on the Income Tax Method of Payment applicable to Small Taxpayers, Tourism, Electric Energy, Television, Internet and Telephone Services, and on the Special Contribution for the Promotion of Tourism“, may choose to take advantage of the benefits granted in this transitional law, for which the DGT shall authorize, by means of a resolution, the installments or the restructuring thereof, as the case may be.
10. CREDIT FOR PAYMENT OF INTEREST AND FINES AGAINST FUTURE TAXES
Fines and interest paid as a result of untimely compliance with the tax return and payment of ISR and CEGC, corresponding to fiscal year 2019, made before the entry into force of the transitional law, may be credited against the payment of ISR and CEGC for the fiscal year 2020.