Companies may not manipulate deferrals to achieve a zero result

The determination of the taxable base for Corporate Income Tax (Impuesto sobre Sociedades) requires an exact correlation between income and expenses. Recently, the Dirección General de Tributos (DGT) has specified the limits of accounting deferrals to prevent companies from using criteria that do not reflect the economic reality of their operations in order to neutralize their results.

What the DGT has ruled

The ruling analyzes whether the application of deferral criteria with the objective of maintaining a zero accounting result in each financial year generates differences between said result and the tax base. The binding body has determined that income and expenses must be recognized in the period in which they accrue, following current accounting regulations.

• Income: Contributions from manufacturers must be recognized as income based on the effective provision of services. If funds are received before the provision, these must be recorded as advances.
• Expenses: These must be recognized at the time the services are received, regardless of when the corresponding invoice is issued.
• Prohibition: No deferral technique is permitted that does not respond to the accrual principle and has the purpose of obtaining a zero accounting result.

What it means for you

This criterion directly affects companies that manage service contracts or third-party contributions and attempt to artificially balance their accounts. If a company uses income and expense recognition mechanisms that do not adjust to actual accrual to avoid the appearance of profits or losses in a given financial year, it will be incurring an incorrect determination of the taxable base. Regulations require that accounting reflects the reality of the provision of services and not a strategy of offsetting items to reach a zero result.

What should be done

It is necessary to ensure that the processes for recognizing income and expenses in the company's accounting strictly adhere to accrual according to the applicable accounting regulations. The correct distinction between advances and services rendered is fundamental to avoid contingencies before the Tax Administration. It is recommended to assess the consistency of the deferral criteria used in contracts with manufacturers and suppliers to guarantee that the taxable base for Corporate Income Tax is correct.