The end of the year is approaching, and for most companies this also means the end of their financial year. We recommend reviewing the expected year-end result to assess whether any action or adjustment is needed before the financial year closes.
Regarding the year-end close, in today’s post I would like to highlight some relevant points to consider.
When reviewing your most up-to-date provisional balance sheets, pay attention to the following items:
- Items pending allocation (account 555), which should be reduced to 0
- Balances with partners and directors (account 551). If there are loans, they must be documented, declared to the Tax Authority and valued at market price
- Director’s remuneration. It is advisable to have it approved by the General Meeting
- Dividend distributions (check whether the exemption applies)
- Balances with customers and suppliers that have been outstanding for some time, due to the potential deductible provision
- Correct accounting of deposits
- Correct depreciation of fixed assets according to the official rates and review of applicable tax incentives
In addition, depending on the type of business you run, you should also consider the following:
- If you operate a company providing professional services, the professional partner should receive at least 75 percent of the profit before tax as salary or invoice (safe harbour)
- If you run a family business, ensure there are no assets or liabilities not related to the business activity in order to apply the Wealth Tax exemption. Consider investing in companies where you hold more than 5 percent and reduce cash holdings when possible
- If you manage a company engaged in R&D&I, ensure staff costs allocated to the project are correctly recorded before applying for the binding report
Finally, there are some thresholds you should keep in mind:
- Large company: if your annual turnover exceeds 6 million euros, next year you will have to file taxes monthly and register with the SII system
- Audit requirement: if you exceed two of the three legal thresholds relating to turnover, asset value and number of employees for two consecutive years, you will be required to undergo an audit for at least two years
Since there are still two months left, this is a good time to assess your current situation and make any necessary adjustments to avoid surprises. We can discuss it whenever you like.
