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Guarantees for the deferral and division of tax liability payments

Article 65 of Act 58/2003 of December 17th of the General Tax Act (hereinafter LGT) states that debts can be deferred or divided if certain requirements are met.

Article 65.3 of LGT states that tax debts which are deferred or divided shall be subject to payment guarantees.

These payment guarantees are set forth in Article 82 of the aforementioned Act as follows:

– Bank endorsement, mutual guarantee company or financial guarantee insurance policies.

– Other guarantees besides bank endorsement or financial guarantee insurance policies. In the case of other guarantees, the taxpayer shall prove that two conditions are met:

1. That the bank endorsement or certificate cannot be submitted or that their submission represents a serious risk to the sustainability of the economic activity.

2. That the guarantee is sufficient.

The law also states that the following may also be considered as a guarantee: mortgage, pledge, or joint and several guarantee, amongst other type of guarantees that might also be deemed sufficient. It is important to point out that the mortgage may tax both movable and immovable assets. In the case of immovable assets, it can either be taxed on the owner´s assets or on the assets of a third party, who taxes his/her assets as a payment guarantee of the debts of the owner.

Can the taxpayer provide other type of guarantees to defer or divide the payment of a debt?

It may be the case that the taxpayer may request precautionary measures to replace the aforementioned guarantees, as stated in Article 81 of the LGT. It should be noted that the postponement of the process will not be limited to a period of 6 months; it can be extended longer if necessary.

Would it be possible not to provide any guarantee to postpone or divide a debt?

Article 82 of the LGT Act states that in certain circumstances there may be a full or partial exemption of guarantee submission.

Exemption cases are the following:

– When tax debt quantities are inferior to those established in the regulations.

– When the taxpayer´s assets are not enough to secure the debt and the execution of his/her assets could substantially affect the maintenance of productive capacity and employment levels of the company or business, or when the interests of the Public Treasury Office could be at risk.

– In the cases set forth in the regulation (such as the Inheritance Tax, for which it is not necessary to provide guarantee, as set forth in article 37 of Act 29/1987).

Partial exemption shall be set when the guarantee does not cover all deferred or divided debt.

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