One of the issues that has raised the most debate in recent times has been the deductibility of interest on late payment in corporation tax.

This has led to a myriad of jurisprudence, as well as multiple comments and opinions from experts in this area.

These discrepancies have now come to an end following supreme court judgment No. 150/2021 of 8 February 2021. It unequivocally confirms the deductibility of interest on late payment in corporation tax, arising from its consideration as compensatory benefits.

The Supreme Court’s ruling confirms that late interest is correlated with income,as these are connected to the exercise of business and are therefore deductible.

As detailed in the judgment: “Late interest, whatever is required in the liquidation in a verification procedure, whether accrued by the suspension of enforcement of the contested administrative act, is considered to be tax deductible expenditure, which is in the legal nature, with the scope and limits set out in Article 20 TRLIS [art. 16 Law 27/2014 (LAW IS)]. This criterion is contrary to that maintained by the Tax Administration and the reviewing administrative body”.

The Supreme Court also concludes that suspensive interest is similar to interest on late payment. They are therefore deductible, as they are intended to compensate the public administration for the delay in receiving the amount that is legally due to it.

Supreme Court arguments

The Supreme Court, in its judgment, establishes the deductibility of interest on late payment in corporation tax on the basis of the following arguments:

  • Late interest is intended to compensate for non-compliance with an obligation to give, or better, for the delay in its performance. In other words, they are compensatory.


  • They cannot be included within the non-deductible expenses set out in the IS regulations (LIS/04 art.14, currently LIS art.15):
    • a. These are not fines and criminal and administrative penalties, the apprehend surcharge and the late filing surcharge for declarations and self-liquidations.
    • B. nor are they donations or liberalities, since the payment by your debtor does not derive from your animus donandi or willfulness, as required by donation or liberality. Its payment is imposed by the legal system, it is ex lege in nature.


  • Not admitting the deduction of late interest would be a penalty that, as such, would require express forecasting, which is not the case.


  • These are financial expenses,as provided for in the accounting regulations (ICAC Resol 9-10-97 standard 9a.2, current ICAC Resol 9-2-16 art.18.3).


  • They are correlated with revenue,as they are connected to the exercise of business activity.


For their deductibility, the principle of accounting registration must be met and, given their nature of financial expenditure, are subject to the limitation on the inducibility provided for these expenses

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Treating interest on late payment in corporation tax

Tax late interest is in no way punishing, but indemnity.

Thus, the interest corresponding to deferrals and splits requestedduring voluntary or executive periods is deductible. Also those caused by the suspension of the execution of the administrative act for claims or remedies.

They are also deductible in cases of non-liability or compliance with obligations under inquiries responses.

On the other hand, interest arising from inspection records accrued in tax periods initiated from 1-1-2015 is also deductible, as these are financial expenses.

In this way, the Supreme Court has closed with this judgment a controversial issue, ruling that, for the purposes of corporation tax,
interest on late payment,
whether those required in the liquidation under a verification procedure, are those accrued by the suspension of the enforcement of the contested administrative act, they are considered tax deductible expenditure, subjectto their legal nature, with the scope and limits that have been set out in this legal basis.

Requirements for deductible expenses in corporation tax

Because there is no doubt that complying with tax obligations is an essential point for any undertaking and, one of these obligations, is corporation tax, a levy that applies to profits obtained by commercial companies and other legal entities. Calculating it correctly is critical to ensure a good accounting close and ensure that all deductible expenses are included.

On many occasions, however, non-knowledge of deductible expenses prevents companies from being fully exploited.

The general rule states that for a company’s expenses to be deductible in corporation tax, they must be directly related to any income that is obtained and must be justified.

From the tax advice AYCE Laborytax, we collect the essential requirements specified by the Tax Agency in order to deduct the expenses:

  • They must be correctly posted to the profit and loss account or the reserve account.
  • The justification for them is also necessary, mainly through the issuance of invoices. These documents must follow the standards set out in the billing regulations.
  • The allocation of expenses has to be carried out in the corresponding fiscal year. There are, however, certain exceptions. For example, revenue and expenses posted to the profit and loss account in a tax period after accrual.
  • Each expense must be directly correlated with an income.

By way of summary, deductible expenses are those corresponding to reliable transactions,related to the obtaining of income, accounted for, allocated in their relevant and well-justified fiscal year.

On a practical level, the most common types of deductible expenses can be divided into the following categories:

  • R&D&I activities related to research, development and technological innovation.
  • Promotion of employment, including the recruitment of persons with disabilities.
  • Investment in film productions, Goods of Cultural Interest and book editing.
  • Expenses related to vocational training.
  • There are other circumstances in which an expense can be considered as deductible as long as they meet the above requirements. For example, the allowances of workers from outsourced companies or the use of vehicles for professional purposes.

Non-deductible corporate tax expenses

It’s as important to know what expenses are deductible as those that aren’t.

Unlike deductible expenses, on which the Corporation Tax Act does not detail what they are but merely issues the characteristics they must meet, non-deductible expenses are specified one by one in the legal text. These are:

  • Those who represent a remuneration of own funds.
  • Expenses arising from the company tax posting itself.
  • Fines or criminal and administrative penalties.
  • Losses caused by the game.
  • Liberalities and donations. In this case, expenses corresponding to customer or supplier care, company staff or promotion of the provision of services or sales, and those that are correlated with revenue, are exempt.
  • Payments to finance activities contrary to the Act.
  • Services provided or requested from tax havens.
  • Expenses that come from debts to entities in the same group.
  • Fees arising from the end of the employment or commercial relationship exceeding one million euros or the compulsory amount stipulated in the Workers’ Statute.
  • Expenses relating to transactions with related entities that have no income or whose nominal tax rate is less than 10%.
  • Losses caused by impairment of equity or equity equity securities.
  • Tax debt of the Tax on Property Transfers and Documented Legal Acts.

In case of any doubt with the resolution of this Supreme Court ruling and how it affects your company, remember that the AYCE Laborytax team is at your side to help you.

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