When the Tax Authority rejects a deferral or payment splitting, self-employed individuals can resort to debt compensation, suspension, or even declaring insolvency. Tax lawyers detail these legal avenues to avoid seizure.
Self-employed individuals who do not obtain a deferral from the Tax Authority are not without options. Last year, the Tax Agency granted 6% more deferrals and payment splits, yet many requests are still denied. Tax lawyers explain that there are legal alternatives to address tax debts without falling into default.
When the Tax Authority Can Deny Deferral
Article 65 of the General Tax Law establishes the cases in which the Tax Agency can directly reject the request. According to José María Salcedo, tax lawyer and managing partner of Salcedo Tax Litigation, debts from withholdings and payments on account, instalment payments of Corporation Tax, or debts arising from bankruptcy proceedings are not deferrable.
Moreover, the AEAT can deny the deferral if the self-employed individual does not demonstrate a temporary and specific economic difficulty. “If a taxpayer is heavily indebted, they will not be granted it, because the Tax Authority understands that they will not be able to manage the splitting,” Salcedo points out. Not presenting the required guarantee or collateral when the debt exceeds 50,000 euros is also an obstacle.
The deferral, when granted, comes at a cost: late payment interest, currently set at 4.06% per annum. However, if it is not viable, there are other avenues.
Debt Compensation: A Little-Known Option
Many self-employed individuals are unaware that they can request debt compensation themselves. “When a taxpayer owes money to the Tax Authority and a refund arises in their favour, it is likely that this refund never arrives, to offset their debts,” Salcedo explains. However, it can also be requested voluntarily: if the self-employed individual has a pending credit with the Tax Agency (for example, after winning an appeal), they can request that it be offset against the debt they expect to generate.
This alternative avoids having to pay interest and speeds up the settlement. However, it is advisable to do this before the voluntary payment deadline expires.
Debt Suspension and Other Solutions
If the self-employed individual disagrees with the debt claimed by the Tax Authority and has filed an appeal or claim, they can request a suspension of the debt. This figure allows for the payment to be “frozen” until the appeal is resolved, although it usually requires providing guarantees. If granted, surcharges and seizure are avoided during the processing.
Another alternative, in extreme cases, is declaring insolvency. When the self-employed individual has no assets to pay, they can request it so that the Tax Authority temporarily archives the debt. It does not cancel it, but it halts the enforcement process. Experts recommend consulting an advisor before taking this step, as it can have consequences for the credit history.
Finally, if the self-employed individual needs liquidity, they can seek external financing. Some entities offer specific loans to pay taxes, although interest rates can be high. The important thing, according to tax experts, is to act before the voluntary payment deadline expires to avoid surcharges and penalties.
In any case, self-employed individuals should know that deferral is not the only option. Compensation, suspension, and declaring insolvency are legal options that, if used correctly, can prevent worse outcomes. It is advisable to consult a tax lawyer to assess each situation.
You may also like
