Withholding error: attribution of the amount to the income period

The correct temporal attribution of withholdings constitutes a critical aspect in the management of income payments. Recently, the Dirección General de Tributos (DGT) has addressed the question of what happens when the payer fails to apply the corresponding withholding due to an error, affecting the tax settlement.

What the DGT has resolved

The inquiry focuses on the temporal attribution of withholdings when these have not been correctly carried out at the time of payment. After analyzing current regulations, the DGT establishes that withholdings must follow the fate of the income they are intended to secure. In this sense, if there is an error on the part of the payer that prevents the withholding from being applied at the time the income is satisfied, the attribution of said amount must be made in the period in which the corresponding income is attributed.

This criterion is based on the regulations of Personal Income Tax (LIRPF Law 35/2006 and RIRPF RD 439/2007) and the Corporate Tax Law (LIS Law 27/2014), maintaining consistency between the accrual of income and the withholding that must accompany it.

What it means for you

For the professional or taxpayer receiving the income, this criterion is relevant for the correct declaration of their income and deductions. If the payer has made an error and has not applied the withholding, the taxpayer has the possibility of deducting the amount that should have been withheld, provided it is attributed to the period in which the income is declared.

On the other hand, for companies and payers, the obligation to apply the withholding at the exact moment of satisfying the income is reiterated. An error in this process does not exempt one from the responsibility of correctly managing withholding flows.

What should be done

In a situation of withholdings not applied due to error, it is necessary to:

• Verify that the attribution of income and the attribution of the withholding coincide in the same tax period.
• Check that the payer's error does not affect the integrity of the declared tax base.
• Assess each particular situation to ensure that the deduction of the omitted withholding is carried out in accordance with the cited regulations.