Purchase and sale transactions with deferred price for personal income tax purposes

Law 35/2006, of November 28, 2006, on Personal Income Tax (hereinafter LIRPF), in its Article 14, paragraph 2. b) in its special rules of temporary imputation establishes that transactions with deferred price will be taxed as follows:

1. d) In the case of transactions in installments or with deferred price, the taxpayer may choose to impute proportionally the income obtained in such transactions, as the corresponding collections become due. Those transactions whose price is received, totally or partially, by means of successive payments, provided that the period elapsed between the delivery or making available and the maturity of the last installment is more than one year, shall be considered as transactions in installments or with a deferred price.

Therefore, if you intend to sell an asset and you are going to collect it in a deferred manner, so that between the date of sale and the last collection more than one year elapses, you can consider two options:

1. Declare the entire gain in the year in which the sale occurs.
2. To declare the gain as it is collected.

It is important to point out that the aforementioned gain will be taxed according to the scale of the savings base which, if there are no autonomous changes, would be as follows:

NET BASE	INTEGRA QUOTA	REMAINING NET TAXABLE INCOME	APPLICABLE TYPE
0,00	0,00	6.000,00	19,00%
6.000,00	570,00	44.000,00	21,00%
50.000,00	5.190,00	150.000,00	23,00%
200.000,00	22.440,00	En adelante	26,00%

• Sale without deferred price

In this first case, the entire gain will be declared in the year in which the delivery of the property takes place and will be taxed at the savings base, at a tax rate of between 19% and 26%.

• Sale with deferred price

In this second case, the gain will be declared as the collections are made and in proportion to the amounts collected. In this way, the payment of the IRPF is delayed, with the consequent financial savings. In addition, the fact of doing it this way, the effective taxation will be lower, since the tax burden is being distributed in different fiscal years and even the marginal rate to be paid could be lower, depending on the amounts.

• Example:

In the fiscal year 2021 a commercial premises is sold for the amount of 600,000 euros, obtaining in such operation a capital gain of 400,000 euros. In the deed of sale, it is agreed that the payment will be made in four equal annual installments of 150,000 euros each, with the first payment being made on the day on which the deed of sale is formalized:

If you declare the entire gain in 2021:

Concept	2021	2022	2023	2024
Profit declared	400.000,00
Quota	96.880,00	–	–	–

 

If you declare the capital gain as you collect it:

Concept	2021	2022	2023	2024
Profit declared	100.000,00	100.000,00	100.000,00	100.000,00
Quota	21.880,00	21.880,00	21.880,00	21.880,00

 

The saving in Personal Income Tax between one option and the other, as can be seen in this example, would be 9,360.00 euros over the 4 years.

Note that if the sale is deeded and the payment of the same is made by means of promissory notes or checks with different due dates, a priori it will be taxed according to those due dates, but whenever promissory notes are obtained these can be presented in the bank and “endorsed”, that is to say, the bank could advance us the money in exchange for a commission, but at the moment that the collection is advanced to us then the taxation of these deferred collections is also accrued, being the effective date the one in which the bank advances us the payment of the promissory notes, in this case we would have to declare everything collected in the declaration of the year in which we collect.

In the previous example, if you receive four promissory notes for 100,000 euros each and in 2023 you discount those of 2023 and 2024, you will have to declare the income of 200,000 euros (100,000 + 100,000) in the income tax return of 2023.

Finally, in this type of operations it is usual to include a resolutory condition in the public deed of sale for the cases of non-payments, by means of which the contract would be terminated and the property would have to be returned to its original owner. If this situation arises and the resolutory condition is executed, it will be necessary to rectify the IRPF declarations in which the gain from the sale has been declared and to request the return of the amounts paid in excess.