Tax Inspection: Everything You Need to Know About the Procedure in Spain

Tax Inspection: Everything You Need to Know About the Procedure in Spain

Tax inspection is a procedure that seeks to verify compliance with tax obligations by taxpayers. It is carried out through different phases, such as initiation, processing, and termination. During this process, pecuniary penalties may be imposed for detected irregularities.

There are also possibilities for reducing penalties if the proposed settlement is accepted or payment is made within the established deadlines. It is important to be aware of available resources, such as the possibility of filing a reconsideration appeal or an economic-administrative claim in case of disagreement. Remember that tax inspection is regulated by the General Tax Law and follows a limited verification procedure. If you need specific assistance, the best option is to contact experts in tax law who can address your specific questions.

Tax Inspection: Concept and Objectives

Tax inspection is a fundamental procedure in the fiscal realm that aims to ensure compliance with taxpayers’ tax obligations. This activity is carried out by the Tax Administration to verify the truthfulness and accuracy of the information provided by taxpayers in their tax declarations.

Functions and Competences of Tax Inspection

Tax inspection has a series of specific functions and competences that allow it to carry out its work efficiently. Among the main functions of tax inspection are:

  1. Conduct control and investigation actions to detect possible tax breaches.
  2. Verify the accuracy and truthfulness of tax declarations submitted by taxpayers.
  3. Collect the necessary information to verify the correct settlement of taxes.
  4. Regularize the tax situation of taxpayers in case of detecting irregularities.
  5. Instruct inspection files that could lead to the imposition of pecuniary penalties.

General Tax Law: Regulatory Framework in Spain

Tax inspection is regulated by the General Tax Law, which establishes the rules and procedures governing this process. This law sets out the rights and obligations of taxpayers, as well as the competences of the Tax Administration in inspection matters. Additionally, the GTL establishes the deadlines, resources, and guarantees available to taxpayers during the inspection procedure.

Tax Inspection Procedure

The tax inspection procedure consists of several phases that allow for the verification of taxpayers’ compliance with tax obligations and the regularization of their situation if irregularities are detected. Below are the main stages of this process:

Stages of the Tax Inspection Procedure

  • Initiation of Inspection Actions
  • Processing of the File Reports and Hearing Process
  • Submission of Allegations Initiation of Inspection Actions

The tax inspection procedure begins with a communication initiating inspection actions from the tax administration. In this phase, the dates and scope of the actions are established, along with the documents and records that must be submitted.

Processing of the File

During the file processing phase, the instruction of the file takes place through the analysis of gathered information, obtaining evidence, making requests, and seeking technical reports. The established deadlines must be followed, and the taxpayer’s right to defense must be ensured. The taxpayer has the opportunity to submit evidence and make allegations during this process.

Reports and Hearing Process

Once all necessary information is compiled, reports are drafted reflecting the incidents and results of the inspection actions. Subsequently, a hearing process is granted to the taxpayer, who has a period to submit allegations and provide documentation considered relevant for their defense.

Submission of Allegations

The submission of allegations is a crucial step in the tax inspection procedure, as it allows the taxpayer to present their position, defend against possible detected irregularities, and provide evidence supporting their arguments. It is advisable to seek specialized legal advice to properly prepare allegations and maximize the chances of obtaining a favorable resolution.

Sanctions and Reductions in Tax Inspection

Proposal for Penalty Resolution

In the context of tax inspection, the proposal for a penalty resolution may arise if possible tax infractions are detected during verification procedures. This proposal involves the imposition of a pecuniary penalty on the taxpayer.

Deadline for Submission of Allegations

Upon receiving the proposal for a penalty resolution, the taxpayer has the right to submit allegations within a period of fifteen business days. During this period, arguments can be presented, and relevant justifications can be provided to challenge the proposed penalty.

30% Reduction for Accepted Sanctions

If the taxpayer decides to accept the proposed settlement in the inspection report, they are entitled to a 30% reduction in the imposed penalty. However, this reduction only applies to infractions described in articles 191 to 197 of the General Tax Law.

40% Reduction for Voluntary Payment and No Appeals

It is important to note that any proposed penalty can be reduced by 40% if the total payment is made within voluntary payment deadlines or within granted installment/deferment periods. This reduction also applies if no appeals or claims are filed against the regularization proposal or the penalty. It is crucial to comply with these requirements to benefit from this reduction.

Resources and Appeals in Tax Inspection

In the tax inspection process, taxpayers have the right to file resources and appeals if they disagree with the actions taken by the Tax Administration. Below are the different types of resources and the deadlines for filing them.

Reconsideration Appeal to the Administrative Office

The reconsideration appeal is an administrative avenue that allows the taxpayer to challenge acts and resolutions issued by the Tax Administration. This appeal must be filed with the corresponding administrative office within one month from the notification of the contested act. It is important to note that, according to current regulations, this appeal is mandatory before resorting to the judicial route.

Economic-Administrative Claim

If a favorable resolution is not obtained through the reconsideration appeal, the taxpayer can file an economic-administrative claim. This claim is submitted to the competent economic-administrative bodies and allows for an independent review of the Tax Administration’s actions. The deadline to file the claim is one month from the notification of the resolution of the reconsideration appeal.

Deadline for Filing Resources

It is important to highlight that both the reconsideration appeal and the economic-administrative claim must be filed within the deadlines established by regulations. In this regard, one must consider the one-month period from the notification of the contested act for the reconsideration appeal and the one-month period from the notification of the resolution of the reconsideration appeal to file the economic-administrative claim.

Limited Verification Procedure

The limited verification procedure is a modality of tax inspection applied in specific cases, with its own characteristics and differences from the traditional inspection procedure. Below are the relevant aspects of this process:

Characteristics and Scope of Application

The limited verification procedure is characterized by having a shorter duration and a more limited scope compared to the conventional inspection procedure. It is applied when irregularities detected in verification actions are not particularly complex, and when the amount of potential settlements does not exceed certain limits established by tax regulations.

This process focuses on verifying the correct compliance with tax obligations and aims to streamline fiscal control actions in specific situations, without losing sight of effectiveness in combating fraud and tax evasion.

Differences from the Inspection Procedure

Unlike the inspection procedure, limited verification focuses on specific aspects of the taxpayer’s activity, without covering all of their tax obligations. This selection is made based on materiality and fiscal risk criteria.

Another difference is that limited verification does not require the issuance of prior reports before initiating the penalty procedure. Once verification actions are completed, the corresponding settlement acts can be issued directly.

Increased Rigor in Limited Verification Actions

In recent years, there has been an increase in rigor in limited verification actions, especially in cases involving higher fiscal risk. This is due to the need to enhance controls in specific areas with a high potential for fraud, such as international operations, special tax regimes, or economic activities with a higher likelihood of non-compliance.

This increased rigor involves greater thoroughness in verification actions, as well as an increase in the demand for documentation and evidence from taxpayers subject to this process.

Frequently Asked Questions About Tax Inspection

How to Know If Tax Authorities Are Investigating Me

If you have doubts about whether tax authorities are conducting an inspection in your case, there are signs that may indicate it. For example, they may send you a communication initiating inspection actions or schedule an interview at their headquarters. They may also request additional information about your declarations or conduct visits to your business premises. In case of suspicion, it is important to be aware of your tax obligations and have all your documentation in order.

Tax Obligations of Taxpayers

Tax obligations are the duties that every taxpayer has with tax authorities. These include submitting the corresponding declarations within established deadlines, paying the owed taxes, and providing all the information required during the inspection process. Additionally, it is important to maintain proper accounting and retain supporting documents for the period established by current regulations.

Taxes and Fees Subject to Inspection

Tax inspection can cover a wide range of taxes and fees. Some of the main ones subject to inspection are the Personal Income Tax (IRPF), Value Added Tax (VAT), Corporate Income Tax, Property Transfer and Stamp Duty Tax (ITP and AJD), and municipal fees. It is important to be aware of the specific obligations and regulations for each of these taxes.

Settlement Procedure and Deadlines

The settlement procedure is the stage where the taxpayer’s tax debt is determined. During this phase, the declarations submitted are verified, and a thorough review of the fiscal situation is carried out. The deadlines for this procedure may vary depending on the case, so it is vital to be aware of the deadlines and comply with the timeframes established by current tax regulations.

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