Annual accounts
The Spanish Companies Act requires any form of company, including a limited liability company (SL) or a company limited by shares (SA), to make annual accounts, once a year.
Contrary to traditional thinking, Spanish law states that the accounts of a company are no longer “secret”, but must be made public. Therefore, once the company has produced its annual accounts, it needs to register them with the Commercial Register. Anyone can go to the commercial register to access the company’s annual accounts and see how the company is operating. The purpose of the annual accounts is mainly so that other people can get an idea of the company’s financial situation.
Note: The production and disclosure of annual accounts is a commercial requirement and is not the same as the concept of tax returns to be filed by companies.
What annual accounts do companies have to do?
The ‘annual accounts’ are a collective term for a series of accounts or statements of assets. There are five documents in the annual accounts, which need to be produced by an accountant with specialist knowledge
-The balance sheet.
-The profit and loss account.
-Statement of changes in net worth
-Statement of cash flows.
-Notes to the financial statements.
Several versions of the annual accounts
Depending on the size of the company or the amount of its assets, the annual accounts can be divided into various versions, from the most complex to the most simple
-General accounts. This is the most detailed version and is suitable for larger companies.
-Simple (abreviado) Annual Accounts. This is the short version of the general accounts and is suitable for medium-sized companies.
-Small and medium-sized business version, suitable for small and medium-sized businesses.
The SME version of the annual accounts can be used if two of the following conditions are met: total assets of up to €4 million, annual revenue of up to €8 million and average annual number of employees of up to 50.
-Micro Business version, for small businesses. As most businesses in Spain are small businesses, this type of version of the annual accounts is also more common.
The micro-business version of the annual accounts is available if two of the following conditions are met: total assets of up to €1 million, annual revenues of up to €2 million and an average number of employees of up to 10 per year.
As long as the company is bigger, the more detailed the annual accounts are.
When do I need to do annual accounts?
The annual accounts need to be produced in the first three months of the following year, for example, for 2022, by 31 March 2023, and signed by the company’s legal representative.
Once the annual accounts have been prepared, they need to be approved by a vote of the company’s general meeting. The general meeting of shareholders must be held before 30 June each year.
Once approved by the general meeting, the annual accounts must be registered in the commercial register by 31 July each year.
What are the consequences of not doing the annual accounts?
The law provides for a fine of €1.200 to €60,000 for not keeping annual accounts or for not registering them in the commercial register within the time limit. In practice, the risk of such fines is relatively small because, due to the lack of interest of the Administration.
For companies in normal operation, accountability is required for day-to-day activities such as tax returns, loan applications and government grants.
In addition, if a company does not produce annual accounts, or if it has produced them but has not registered them with the Commercial Register in time, in the event of bankruptcy the legal representative would be jointly and severally liable for the company’s debts.
