July is usually an especially important month in companies’ financial calendars in Spain. For many companies whose financial year coincides with the calendar year, it is the period in which Corporate Income Tax is filed, together with other recurring obligations linked to the quarterly closing.
However, this time of year does not only bring together relevant tax obligations. It is also an ideal moment to review the evolution of the business, anticipate possible deviations and prepare the second half of the year with greater confidence.
Beyond tax compliance, reviewing the company’s accounting and tax information offers a very valuable opportunity. If the information correctly reflects the reality of the business, it makes it possible to identify risks, deviations or issues that should be addressed before the annual closing.
In this context, carrying out an accounting and tax review halfway through the year allows companies to make better-informed decisions, correct possible errors and plan key aspects more effectively, such as cash flow, investments, financing, the deductibility of certain expenses or the application of tax incentives.
Why is July a good time to review the accounting and tax situation?
Although the formal closing of the financial year usually takes place at the end of the year, July already provides a sufficiently representative view of the company’s evolution. In many cases, the data from the first half of the year helps detect whether results are aligned with the expected objectives or whether adjustments are needed for the coming months.
This review is especially relevant for growing companies, businesses with more complex corporate structures, companies with inventory, corporate groups, entities with related-party transactions or companies considering new investments, financing or internal reorganisations.
The aim is not only to prepare taxes correctly, but to use accounting and tax information as a management tool.
Accounting aspects that should be reviewed
A first review should focus on checking the consistency of the main accounting accounts and their correspondence with the tax obligations already filed.
Among the most important points, it is advisable to review:
- Accounts related to VAT, withholdings, payments on account and Corporate Income Tax.
- Correct reconciliation of bank accounts, cash, credit lines and debt.
- Outstanding balances with customers and suppliers.
- Pending items or unidentified amounts.
- Correct accruals and deferrals of income and expenses.
- Consistency between accounting records, tax forms and supporting documentation.
This analysis helps detect possible mismatches before they accumulate ahead of the annual closing.
Fixed assets, depreciation and investments
Another relevant point is the review of the company’s fixed assets. It is important to check that assets are correctly recorded, that assets under construction are properly distinguished from assets already in use and that depreciation is being applied consistently.
It is also advisable to analyse whether certain expenses should have been recorded as a higher value of the asset, especially when they involve an improvement, an extension of useful life or an increase in production capacity.
This review may have a direct impact on both the accounting result and the Corporate Income Tax base in Spain.
Inventory, customers and suppliers
In companies with stock, inventory must accurately reflect the real situation of the business. General estimates are not enough. There must be clear identification of the items, proper valuation and sufficient documentation in the event of impairments.
Likewise, reviewing customers and suppliers’ makes it possible to detect old balances, pending invoices, doubtful debts or differences between the accounting records and the company’s operational reality.
At this point, it is also important to pay attention to related-party transactions, especially in corporate groups or companies with recurring economic relationships between entities within the same environment.
Deductible expenses and tax adjustments
One of the most sensitive aspects in any tax review is the deductibility of expenses. The fact that an expense is recorded in the accounts does not necessarily mean that it is tax deductible.
For an expense to have tax effects, it must be justified, correctly recorded, allocated to the corresponding financial year and related to the company’s economic activity.
In addition, there are items that may require specific adjustments, such as certain financial expenses, penalties, donations, impairments or directors’ remuneration. In the latter case, it is advisable to check that the remuneration is correctly provided for and approved when necessary to support its tax deductibility.
Corporate Income Tax planning
The filing of Corporate Income Tax in Spain should not be approached as an isolated procedure. Its correct preparation requires reviewing in advance different elements that may influence the company’s taxation.
These include:
- The offsetting of tax losses.
- The application of reserves.
- Deductions for R&D&I, job creation, investments or donations.
- Depreciation criteria.
- Non-deductible expenses.
- Related-party transactions.
- The possible existence of applicable tax incentives.
Analysing these aspects in time helps avoid errors, reduce risks and correctly use the options provided by tax regulations.
Cash flow and decision-making for the second half of the year
The accounting and tax review should also help the company look ahead. A company may be generating income and still face cash flow tensions if it has not properly anticipated its tax obligations, debt maturities, supplier payments or investment needs.
For this reason, July is a good time to ask certain questions:
- Is the company meeting its profitability targets?
- Are there relevant deviations in costs or margins?
- Will cash flow support the decisions planned for the second half of the year?
- Are there expenses, investments or tax incentives that should be planned before year-end?
- Is the current accounting and tax structure still efficient for the company’s activity?
Answering these questions allows the company to anticipate issues and make decisions with greater confidence.
Turning compliance into a management tool
Accounting and tax closing should not be understood only as a technical obligation. When properly approached, it can become a tool to better understand the company’s situation, anticipate risks and prepare strategic decisions.
In an increasingly demanding business environment, companies that review their accounting and tax information periodically and analytically have a clear advantage. They do not wait until the annual closing to detect problems, and they do not make relevant decisions without a complete view of their situation.
At LEIALTA, we help Spanish and international companies review their accounting, tax and corporate situation from an integrated perspective, combining regulatory compliance, tax planning and business decision-making.
Do you need to review your company’s accounting and tax situation in Spain?
Our team can help you identify risks, analyse tax optimisation opportunities and prepare the second half of the year with a clearer and more organised view of your business.
