If you ever have had dealings with the government then you know that the payment deadline is not suspended by starting proceedings against the administrative charge in question. In the vast majority of cases, the gestor will advise you two options: pay first and then talk, or don’t pay and risk having to pay penalties and interest on the original amount. What few people know is that there is a third option: the deposit.

Why is there no deferred payment on appeal?

In administrative proceedings, the general rule is that the obligation to pay is not suspended if you appeal a decision, except in the case of an administrative penalty, which is suspended on appeal. This has to do with the balance between the interests of the government and the interests of the taxpayer.

This balance is also known as the balancing of interests (ponderación de intereses). Here, the legislator has examined what interests are at stake when appealing against an administrative charge. On the one hand, you have the taxpayer’s interest in not paying any money if he disagrees with the assessment, and on the other, you have the government’s interest in ensuring that the amount is paid in advance to avoid situations where the taxpayer declares himself insolvent at the end of the procedure and thus avoids payment.

For administrative acts involving the payment of a sum of money, the legislator has decided that the interest of the administration takes precedence over the interest of the taxpayer, especially since the money can be returned without problems. An administrative act involving destruction of a house, which cannot be undone, would be a different matter.

Options to avoid surcharges

Now that we know why administrations do not suspend payment of a tax or assessment during the proceedings, let us see what the taxpayer’s options are.

• Pay first and talk later

This is the option most commonly used by taxpayers. They pay the tax assessment first and then appeal in due course. This way, the government cannot demand more money from you than the amount originally paid.

The disadvantage of this option appears when the proceedings end and it turns out that the body that made the decision has ruled in your favor, giving you a refund of the money paid. In practice, the refund can take a long time. Depending on the government department in question, you may have to start a new administrative procedure to collect the amounts you are entitled to. It can take months, if not years, between the decision and the actual return of the money to your bank account.

• Not paying and taking the risk

This second option is riskier. You don’t pay the settlement and let the period run while you initiate proceedings. If the decision-making body rejects your argument, you have to pay the original amount plus 20% of the amount due and, if applicable, penalty interest for late payment.

The advantage of this option is that apart from having your money at your disposal during the proceedings, you do not have to pay a penny if the body making the final decision declares your appeal to be well-founded and also, no funds have to be recovered.

• The deposit or bank guarantee

A third option provided by the law is to submit a bank guarantee or surety bond that guarantees the collection of the amount owed by the administration if the administration wins the proceedings. To do this, you have to go to your trust bank with the settlement and ask them to give you a bank guarantee. Depending on the bank, they may block the amount in your account so that you cannot use it until there is a final decision, granting or rejecting the claim.

Keep in mind that the bank account in which the bank guarantee is requested must be in your name as a taxpayer for the government to accept it. It is not enough to simply put the money in a third-party account, such as this firm’s account.

Selena Escandell Beutick