Companies may impute income and expenses in Corporate Tax through accounting deferral

The management of income and expenses in Corporate Tax (IS) is usually closely linked to the economic reality of the operations. A recurring question for companies managing long-term contracts is whether the accounting treatment of deferral is fully valid for determining the tax base of the tax.

What the DGT has resolved

The Directorate General of Taxes (DGT) has determined that the accounting treatment of operations must coincide with the tax treatment. This is because the Corporate Tax Law (LIS) does not establish imputation rules different from accounting accrual. In this sense, the ruling establishes the following criteria:

• Acting as principal: If the entity acts as a principal in the operation, it must impute both income and expenses in accordance with the fulfillment of obligations and accrual during the duration of the contract.
• Acting as agent: If the entity acts solely as an agent, it may only recognize as income the commission or margin corresponding to its management.
• Extra-accounting adjustments: It is not necessary to make extra-accounting adjustments if the entity follows the proper accounting deferral.

What it means for you

This ruling has direct relevance for companies that distribute software, services, or any type of goods through contracts that extend over several fiscal years. If your business model involves the provision of continuous services, the possibility of applying accounting deferral allows the IS tax base to faithfully reflect the accrual of the operation, avoiding distortions caused by total billing in a single fiscal year.

What should be done

It is fundamental that the entity precisely determines its role in each transaction: whether it acts as a principal or as an agent. This distinction is what will determine whether the total volume of the operation is imputed or only the intermediation margin. It is recommended to verify that the deferral criteria applied in the accounting strictly comply with the accrual principle to ensure their full validity before the Tax Administration.