A payment on account is the partial fulfillment of a payment commitment made prior to the expected date for said settlement.
There are occasions when, through a payment on account, an individual or a debtor company has the possibility to settle in advance a debt or payment commitment .
The economic field in which this method is most frequent is the fiscal one, in which payments on account are used to pay previously tributes or taxes partially and in advance.
Thus, the quarterly payment of taxes such as VAT or monthly income tax withholdings are simple examples of this economic practice. In the same way it happens with the taxes of companies paid by the mercantile companies.
In these cases and in many others at the end of the fiscal year there will be a tax assessment of the tax.
Depending on this definitive calculation, it will be possible to refund an amount of money that has been excessively taxed, or on the contrary, a complementary payment as a higher tax payment than previously calculated in fractional payments is necessary.
Existing payments on account
Due to their nature and within the tax field, three different payment methods are distinguished:
- They are percentage parts of income or wages that the State retains as a mode of future tax payment. At the time of the end of the tax period, the Administration will settle the final tax amount, taking into account these previous charges.
- Income on account. It is common in payments in kind. Since it is not a matter of monetary amounts on which to withhold, the payer calculates in monetary terms the corresponding amount that would have to be paid to the State.
- Fractional payments. The debtor divides the payment of his tax, partially advancing his payment before the final settlement. Many professionals are obliged to carry out their taxation in this way.