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ASSIGNMENT INSTRUCTIONS

This assignment is for my Financial law and Tax law course for my business degree. It’s related to the Spanish legal system because it is a Spanish university. I added the unit for the source of material.
Thank you for the help!
The Assignment:
The company Escobar Entreprises, S.L. has been subject to a tax inspection for Corporate Tax, which ends with a notification on 1 September 2022, with a tax assessment according to which it must pay the amount of 218,456 euros as a tax liability, corresponding to Corporate Tax for the financial year 2018. The late payment interest must be determined in the knowledge that the voluntary period for payment of corporate income tax ended on 30 June 2019, so that interest accrues from the following day.
A.) Calculate the amount that Mr. Escobar should pay in principal and interest in arrears for late payment.
B.) What percentage of interest should he apply and why?

HOW TO WORK ON THIS ASSIGNMENT (EXAMPLE DRAFT/ESSAY)

We must use the following formula to calculate the amount that Mr. Escobar should pay in principal and interest in arrears for late payment:

Total amount = principal + interest (Principal x Interest Rate x Time)

A.) Total amount calculation:

Given that the tax liability is 218,456 euros, the principal amount is 218,456 euros in this case. Assume the interest rate is 3% and the time period is 38 months, from 1 July 2019 to 1 September 2022.

Total: 218.456 + (218.456 x 0.03 x 38/12)
Total sum = 218,456 + (218,456 x 0.03 x 3.16)
The total is 218,456 + 20,700.70.
239,156.70 euros in total

As a result, Mr. Escobar must pay a total of 239,156.70 euros, which includes both the principal amount and the interest for late payment.

B.) Interest Rate Explanation:

The Spanish tax authorities determine the applicable interest rate for late payment of corporate income tax in Spain. According to Spanish tax law, the interest rate for late tax payment is equal to the sum of the European Central Bank’s (ECB) reference rate plus 5 percentage points.

According to the assignment, the voluntary period for payment of corporate income tax ended on June 30, 2019. As a result, interest begins to accrue on July 1, 2019, and we must consider the interest rate in effect from July 1, 2019 to September 1, 2022.

The ECB’s reference rate for the period 1 July 2019 to 1 September 2022 is available on the ECB’s website. Assume the reference rate for this time period is 0.25%.

As a result, the applicable interest rate for late payment of corporate income tax in this case is:

The interest rate equals the ECB reference rate plus 5%.
Rate of interest = 0.25% + 5%
5.25% interest rate

As a result, the applicable interest rate in this case is 5.25%.

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