Many workers have debts acquired for different reasons.

Not being up to date in the payment of debts with the tax authorities or the Social Security can have terrible consequences for a self-employed person. In addition, it often happens that these debts accumulate with penalties, plus surcharges and interest, and with other private debts that the self-employed may have with their suppliers.

All this can lead to the bankruptcy and cessation of the self-employed person’s activity and even to the seizure of his or her assets. And, in the worst case, a prison sentence and the impossibility to obtain public subsidies or aid and to enjoy tax or Social Security benefits or incentives, for alleged tax or Social Security fraud, among other possible offences.

Sometimes, either by action or omission of the self-employed, either intentionally or through absent-mindedness, lack of liquidity or other reasons, declarations, self-assessments or contribution documents are not submitted within the deadlines specified by law or are not submitted correctly. In any case, all or part of the amounts due remain unpaid.

This is when the dreaded debts with the Treasury or Social Security arise, and many self-employed people are unaware of the concept of the statute of limitations and the joys that this legal figure can offer them.

When do Social Security debts become time-barred?

Failure by the self-employed to pay Social Security debts on time, such as the monthly contribution to the Special Scheme for Self-Employed Workers (RETA), unless they request a deferment, among others, means that they will have to pay surcharges and interest and, if they persist in non-payment, their assets will be seized.

No obstante, según el Reglamento General de Recaudación de la Seguridad Social, las deudas con ésta, en general, prescriben a los 4 años desde que haya finalizado el plazo señalado para ingresarlas voluntariamente en la Tesorería General.

This means that the self-employed person, once these 4 years have elapsed, will not be obliged to pay the debt. However, during this period, he/she is obliged to keep all the relevant documentation, under penalty of a fine.

However, in the case of offences against Social Security, when the amount of the defrauded contributions or of the undue refunds or deductions exceeds 50,000 euros, the limitation period will be 5 years, or 10 years if the referred amount exceeds 120,000 euros.

When is the statute of limitations for tax debts?

The right of the tax authorities to demand payment of the self-employed person’s tax debts, according to the General Tax Law, generally expires after 4 years. This is also the period in which the documentation must be kept, under penalty of a fine, although this may be extended in the event of an inspection by the tax authorities.

For example, if the deadline for the self-employed to file their personal income tax return for 2022 ended on 30 June 2023, the tax authorities will be able to review the return until 30 June 2027. Looking back, it will not be able to review returns prior to 2020, but it will be able to review returns for 2020, 2021 and 2022.

And, as a consequence, the self-employed will not be obliged to pay the debts derived from the declarations prior to 2020, even if they exist, because those tax debts would have lapsed.

The same applies to VAT returns. However, according to the Supreme Court, in the case of VAT, the 4 years are counted from the date of submission of each monthly or quarterly self-assessment, and not from the end of the deadline for filing form 390 in January of the following year.

On the other hand, if they are customs duties, the tax administration has a review period and, therefore, the debt is time-barred after 3 years.

However, in the case of an offence against the Public Treasury, when the amount of the amount defrauded, the amount not paid or the tax refunds or benefits unduly obtained or enjoyed exceeds 120,000 euros, the statute of limitations period will be 5 years, or 10 years if it exceeds 600,000 euros.

What can prevent the debt from being time-barred?

Certain events can interrupt the statute of limitations on a debt owed to the tax authorities or the social security authorities. For example:

  • Bringing actions before the courts.
  • Acknowledgement of the debt by the self-employed.
  • Actions of the Tax Administration or Social Security leading to the recognition, regularisation, verification, inspection, assurance, settlement and collection of the debt, provided that they are carried out with the formal knowledge of the self-employed person.
  • Lodging of claims or appeals by the self-employed before these administrations or the courts.
  • Court order to stay the administrative procedure.
  • Self-employed person’s insolvency proceedings.
  • Application for a financial benefit from the Social Security, when the latter can advise the self-employed person that, in order to be recognised, he/she must be up to date with the payment of his/her contributions.

In such cases, the limitation period may be extended or start to run afresh from such events or from the date of the final decision or judgement.