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How To Ask For a Tax Deferral?

Law and Tax ChangesTax Agency (Hacienda)

tax deferral

In your daily activity, you have to face many payments: product providers, external services, self-employed’s fees, taxes, etc. There may come a time when you have water up to your neck. Who do you defer payment to at those times? Asking for your taxes deferral can be an excellent strategy to achieve immediate liquidity at a meagre financial cost.

Why ask for a tax deferral?

Well, for several reasons … 

1. The Treasury allows you to defer debts of up to € 30,000 (that is, you cannot exceed this figure if we add the debts you want to defer and those already deferred) without the need to provide guarantees.

2. You can cancel the pending debt at any time without incurring any penalty. And you also save on interest.

3. The financial cost is low. The Tax Agency will charge you late interest on the deferred amounts. In 2021 the default interest stands at 3.75%.

How can I ask for a tax deferral?

The next question you will be asking yourself is how to get this postponement. The procedure is effortless. You must submit an application identifying the following:

– the debt, the period, the terms in which you plan to pay it,

– direct debit and

– the reasons that justify the inability to meet the debt at present. You must submit this application before the end of the voluntary pay period.

In our Professional plan, we include the procedures to request a tax deferral.

Once submitted, you have to wait for the resolution taken by the Treasury on the postponement. Keep in mind that this resolution may take a while to reach you, and it will depend on the Tax Administration that manages it. From our experience, they usually respond in less than a month.

You can get three types of response:

1. The resolution has not yet arrived, but we are already on the date of the first payment term. What you have to do is enter the term that you committed to in the postponement request. If you didn’t do it, the Tax Agency would have an apparent reason not to grant it. If more than six months go by without a response, the application may be considered rejected.

2. They resolve to grant you the tax deferral. In this case, there are also two options: that they accept the payment schedule that you proposed yourself, so you have to follow it. Or that they propose another, before which you can either follow it or file an appeal to the decision made by the Treasury.

3. They deny the postponement. Denying your application opens a new voluntary payment period from the date of denial. You will have to pay default interest for the period of time elapsed between the end of the voluntary term and the effective payment date, but no penalties will be applied.

How many instalments can I request?

If the amount you ask for a deferral is greater than € 1,000, you can even plan to pay it in 12 monthly instalments. The worst that can happen is that they do not accept that payment schedule, but they will offer you the most approximate. 

If you request more than 12 terms, you may be required to provide a guarantee.

What tax forms can I postpone?

(we talk about the most common for freelancers)

Personal income tax (form 130 and Annual income form 100)

You can postpone both forms with no limit other than the maximum amount of € 30,000.

Withholdings (forms 111 and 115)

You cannot postpone debts that correspond to withholdings.

VAT (form 303)

You can only request a deferral of the amount of output VAT that you have not collected on the date of presentation of the postponement.

Here is an example to make it more transparent:

Imagine that in a quarter, you have invoiced € 6,500 + VAT (€ 1,365), you do not have any expenses, and you want to defer all the VAT that you pay, the € 1,365. 

Your client has only paid you 4,000 + VAT (€ 840). For that reason, you can only request a postponement for uncollected VAT, that is, € 1,365 – € 840 = € 525.

How can I calculate the interest that I will have to pay?

The AEAT (Tax Agency) has created a very easy-to-use calculator with which you can get an idea of the financial cost of granting a postponement before requesting it.

You can access this calculator from this link, and then I will give you some small explanations so that you can take advantage of it.

What information should you include?

– Start date (Fecha de inicio). You must include the deadline for submitting the model. For example, the deadline for filing form 130 for the first quarter of 2021 is 20/04/2021.

– Date of the first expiration (Fecha del primer vencimiento). You should always put that the first term expires on a 5th or 20th day (as established by the Law). Our advice is that you put, at least, the 20th of the month following the end of the voluntary period. In our example of form 130 from the first quarter of 2021, we would put at least 20/05/2021. Although if you give them more time, the better because you give them more time to resolve.

– The total fee amount (Importe cuota total). It is simply to include the amount of tax you want to defer.

– Urgency surcharge (Recargo de apremio). You only have to fill in this field if you have already received a request from the AEAT requesting a tax payment that you hadn’t made in a voluntary period.

Finally, you must choose the periodicity and the number of terms. You must leave the option equal quotas (cuotas iguales) checked in Sí (Yes).

Cost of the tax deferral

To give you an idea of this type of deferment’s financial cost, we have calculated the interest that would result when requesting a deferral of a € 2,500 debt in 10 months, and the result is € 40.17.

Finally, keep in mind that if you have paid less than € 100 in a tax form and you ask for a deferral, the most likely thing is that the Treasury will deny you. Of course, you would save the time it would take to resolve and send you the payment letter. That is one or two months.

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