October brings one of the recurring Corporate Income Tax deadlines for many Spanish companies: the second instalment payment of the year, filed through Modelo 202.
Although this is a payment on account rather than the final annual Corporate Income Tax return, it should not be regarded as a mere administrative formality. The amount paid will subsequently be deducted from the final tax liability, so reviewing the calculation carefully can help identify potential discrepancies in advance and avoid unnecessary pressure on cash flow.
Who may be required to file it?
The filing obligation depends on the circumstances of each company and on the calculation method applicable in each case. For example, entities whose net turnover exceeded €6 million during the relevant previous twelve-month period must calculate their instalment payments using the method based on the taxable base generated during the current financial year, in accordance with Article 40.3 of the Spanish Corporate Income Tax Law, and must file Form 202 even where no amount is payable.
For other companies, both the applicable calculation method and the filing obligation should be reviewed on a case-by-case basis.
Why should companies review the October payment carefully?
By October, businesses already have several months of current-year accounting information available. This makes the second instalment a useful point at which to compare the company’s actual performance with the assumptions made earlier in the year.
Among other matters, companies should review:
- the accumulated accounting result and the main tax adjustments;
- changes in turnover or profitability;
- tax-deductible and non-deductible expenses;
- tax losses carried forward or tax credits that may be applicable;
- instalment payments already made in April;
- any extraordinary transactions carried out during the financial year; and
- the cash available before arranging the payment.
When is Form 202 filed?
For companies whose tax year follows the calendar year, the October instalment corresponds to period 2P. The general filing period is during the first twenty calendar days of October. Where payment is made by direct debit, the deadline is generally earlier.
Although it is an advance payment towards the Corporate Income Tax ultimately payable, an inaccurate estimate can have a direct impact on a company’s liquidity.
The October review can therefore also serve as an initial indication of the tax position with which the company may close the financial year.
At MDG Advisors, we recommend reviewing the company’s accounting records and tax position before each instalment payment, rather than treating Form 202 as an isolated compliance obligation.