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V0791-16 29 February 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · devengo

Advances received are not treated as income for Corporation Tax until goods are transferred

A company sought clarification on whether advances received for the manufacture and delivery of windows should be included in the Corporation Tax taxable base. The DGT ruled that advances do not constitute income until the goods have been transferred and accounting requirements are met.

The question raised

Do these advances form part of the Corporate Income Tax base for the fiscal year in which they were collected, or should the total amount of the contract be included in said base even if the corresponding expense items have not been allocated? Would it be possible to make a temporary adjustment and, if applicable, which item of the Corporate Income Tax would reflect such an adjustment?

The DGT's ruling

Income is included in the tax base at the time of accrual, in accordance with accounting regulations and the principle of correlation. Amounts received prior to the transfer of goods are advances that do not count as income until the conditions of the 14th standard of recognition and measurement of the General Accounting Plan are met. If there are performance obligations at different times, the consideration must be allocated in proportion to the fair value of each obligation.

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