Has your company gone wrong and you are keeping it inactive? You need to know that dormant companies have obligations that must be fulfilled with the Tax Authorities and the Commercial Registry. In this post we tell you what dormant companies are, what obligations they have and what kind of obligations they have and how to manage their sale and purchase.
What are dormant companies?
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The winding up and liquidation of a company takes time and money, which is why many entrepreneurs decide to make the company dormant. Dormant companies can therefore be defined as companies that cease economic activity, but are not liquidated.
The inactivity of a commercial company may be due to problems between the partners, to financial difficulties of the company or to a lack of funds to dissolve it, among other causes. To make a company inactive, all you have to do is file form 036 with the Tax Agency to report the inactivity by ticking box 140 relating to the cessation of activity without liquidation.
Obligations of dormant companies
Dormant companies have three types of obligations:
- With the Tax Agency. If there are withholdings for professionals, you must declare them with form 111 every quarter and, subsequently, file form 190 annually. On the other hand, if you have rented premises or an office, you must file forms 115 and 190 to declare and pay the withholdings made. In addition, it is important to remember that, even if the company is inactive, you must file Corporation Tax and tick the box relating to inactive companies.
In relation to VAT, as no invoices will be issued due to inactivity, there is no obligation to declare it. Nor are there any deductible expenses in the case of dormant companies.
- With the Commercial Registry. The company’s annual accounts must be approved and filed with the Commercial Register. In general, the company must: keep the accounts, legalise the books, draw up the annual accounts and file them with the Commercial Register.
- With the Social Security. In the event that the working partners of the company and the administrators do not carry out any other activity as self-employed, they may deregister from the RETA.
It is important to be aware that leaving a company dormant without a deadline may result in penalties being imposed by the tax authorities as it is considered detrimental to allocate resources to these companies. In addition, it could result in the closure of the Companies Register page (so you will not be able to comply with the obligations relating to this register) and the revocation of the NIF. In a previous LEIALTA article we discussed what to do if a company’s VAT number is revoked.
How to reactivate an inactive company?
To reactivate an inactive company, all you have to do is file form 036 (census declaration) again and notify the tax authorities of the reactivation of the company. You can file the form electronically using a recognised electronic certificate.
It is important to remember that the maximum time a company can remain inactive is one year. Once the one-year period has elapsed, the administrator must call a General Meeting within two months to reactivate the company. If this procedure is not carried out, the company must be dissolved.
In fact, Article 363 of the Capital Companies Act establishes in section 1.a that
1. The capital company must be dissolved
(a) On cessation of the exercise of the activity or activities constituting the corporate purpose. In particular, termination shall be deemed to have occurred after a period of inactivity of more than one year.
Steps for the sale and purchase of dormant companies
Sometimes inactive companies are bought and sold in order to avoid paying the costs of incorporating a new company and to save time in the formalities. It is a way of getting a company ready to start business in a very short time.
The steps to proceed with the sale and purchase of dormant companies are as follows:
- Contact a law firm with expertise in the sale and purchase of companies.
- Choose the company you wish to buy and study its situation.
- Execute the public deed of sale of shares before a notary. In this deed you can modify: the corporate purpose, the name, the registered office and the administrative body.
- Register the deed in the Commercial Register.
- Fill in and file form 036 to notify the Tax Authorities of the restart of the activity.
If you have an inactive company and you wish to sell it or you want to comply with all the obligations with the Tax Authorities and the Commercial Registry, contact our team of expert advisors in commercial companies so that they can study your case, indicate the various legal alternatives that exist and carry out all the necessary procedures.