In these times of crisis, many people ask what possibilities they have, according to the Law, for paying their debt with the Public Tax Administration.

Can I apply for a deferment of my debt? Yes, you can, but it depends on the amount you owe. If it is less than 6,000 euros, no problem, because you only have to fill out an application form, stating the reasons why you cannot pay your debt at the regulatory payment period. Then, usually, you will be granted deferment. In the event that your debt is higher than 6,000 euros, you will have to submit a bank guarantee, mortgage an asset, or give guarantees which, in most of the cases, you don't have or which are very expensive. For instance, if your debt amounts to 10,000 euros, you could solve the problem like this:

You could make a partial payment of your debt so the amount owed totals less than 6,000 euros and then apply for a deferment of the remaining of the debt. Imagine you have to make an IGIC quarterly payment of 10,000 euros. You could pay 4,500 € and then apply for the deferment of 5,500 euros.

When a company applies for a deferment within the voluntary term, the Tax Administration stops all forceful actions, such as seizures to collect the debt. However, the application cannot be submitted when the Tax Administration or the Social Security Department have already notified the debtor company.

Can any kind of debt with the Social Security Department or the Tax Administration be deferred? According to the General Tax Law, nearly all debt with the Tax Administration can be deferred. Companies use to apply for a deferment of the payment of IGIC and Companies Tax. In order to apply for a deferment of the IRPF (Personal Income Tax) payment, the company must prove that such expenditure will compromise its production capacity or its employees. Until now, it was not likely that the Tax Department accepted deferring the IRPF payments. The Chancellor of the Exchequer, aware of the current economic problems, has recently assured that the Public Tax Administration shall allow, as an exception, the deferment of the IRPF payments.

Is any guarantee required to apply for a deferment? Yes, it is, but with some exceptions. When the amount owed is higher than 6,000 euros, the company has no need of a guarantee. For debts with the Social Security Department, the limit is 30,000 euros. Most of the applications are below such amount. On the other hand, when a company cannot obtain a bank guarantee from any credit institution or guarantee company, it can submit a mortgage or a performance bond, as a guarantee.

Does deferment of debt imply any cost? Yes, it does. According to the Tax Administration, "it cannot be cheaper than a bank credit". Companies deferring the payment of their debts will have to pay late interests, which in 2009, will be incurred at a rate of 7%. However, when a company submits a guarantee along with the deferment application, the "legal interests" will be applied, which are charged at 5.5%. According to the Bank of Spain, one-year bank loans to companies were listed at 6.32% in September. The increase in the bank's requirements in order to grant credit explains in no small part the increase of deferment applications.

What information should the company submit in order to apply for a deferment? Both for the Tax Administration and for the Social Security Department, companies have to submit all the information necessary to prove their need for deferment. In addition, companies have to propose a deferment period and the payment terms and, if necessary, include the corresponding bank guarantee.

What are the requirements considered by the Administration to accept or deny a deferment application? First of all, the Administration will verify that the company has a real cash problem. Both the Tax Administration and the Social Security Department verify that the company has no debt with the Administration and that its cash problems are reversible and that the debt can be paid in the future. Even so, each case is individually reviewed and criteria to accept or deny an application are not public.

Does the tax administration accept payment in kind? Yes it does. In that case, companies should apply for such payment method to the Administration and the reply, whether positive or negative, should be notified within a six month term; in case of a lack of reply, the application will be considered denied. The increasing difficulties of getting credit from a bank have increased the number of applications for deferment.

Despite the fact that the interest collected by the Tax Administration is higher than that collected by the banks, companies find it easier to get help from the Administration rather than the banks, which are reluctant to give credit.

Likewise, companies can apply for a deferment of their debt with the Social Security Department. If the Tax Administration grants the deferment, it will establish a payment calendar and the corresponding late interests will be accrued. In case the Public tax Administration denies the deferment, companies will have to pay their debt in the terms indicated by this entity, which usually are one month and some days.

Finally, in the event that a company does not obtain the deferment and cannot pay its debts, the Public Tax Administration will start the payment period and will try to collect the debt by force (account seizures, mortgage and guarantee executions, etc.)