Companies must include Property Tax (IBI) refunds in Corporate Income Tax

The tax treatment of refunds for taxes paid unduly has raised doubts regarding the fiscal year in which companies must report them. Following the receipt of amounts corresponding to previous years, the administration has specified the exact moment for their inclusion in the Corporate Income Tax taxable base.

What the DGT has ruled

The Dirección General de Tributos (DGT) has determined that the income derived from the refund of Property Tax (IBI) installments must be included in the Corporate Income Tax taxable base of the period in which the credit right becomes due. This criterion aligns with current accounting regulations.

Furthermore, the resolution establishes that it is not appropriate to rectify the tax returns of the fiscal years in which the expenses were originally recorded, provided that such amounts were deductible and met the requirements for imputation and justification at that time. Consequently, the refund does not imply a correction of past expenses, but rather the appearance of a new income in the current fiscal year.

What this means for you

If your company receives a refund for a tax that was recorded as an expense in previous years, you should not attempt to modify the tax returns for those past years. The tax burden falls on the fiscal year in which the company has the legal right to demand that money. This criterion avoids the need to make rectifications for periods that are already closed, provided that the original deductibility of the expense was correct under the Corporate Income Tax Law and the Commercial Code.

What you should do

It is necessary to verify the exact moment when the credit right for the IBI refund becomes due to determine the correct fiscal year. You must ensure that the original expenses that led to the refund met all justification requirements to avoid contingencies. Each tax refund situation must be analyzed to confirm that the inclusion in the taxable base is carried out according to the enforceability of the credit and not the date of actual receipt.