If you are an international investor in Spain your chances of being inspected are rising considerably.
Spain badly need international investors to boost the economy but the idea does not land in its very slow fiscal administration. The AEAT, Spanish Tax Agency, is not only a difficult agency for international taxpayers but also for Spanish taxpayers with international interests.
The Spanish tax procedures are rooted in a two hundred years old administrative system overloaded with written formularies and responses that does not allow for an agil system. Language is definitively a problem for those who does not speak Spanish, but even if you speak the language, the tax agency rules and regulations create a complex labyrinth.
As mentioned in a previous posting, the Spanish Tax Inspectors continue their activity after international High Net Worth Individuals and multinationals and this trend does not seem to lessen, fueled up with a generous tax inspectors’ bonus scheme! The offensive is supported by the SEPBLAC (Executive Service of the Commission on Money Laundering and Monetary Offences’ Prevention in Spain) and the ONIF (Anti-Fraud Investigation’s Office).
It is true that some tax inspections are triggered at random but the majority respond to the targets set by the 2016 Annual Tax and Customs’ Plan, and in theory, if all your tax records are clear there is not much to fear. Unfortunately that’s only the theory as once the tax inspection walks in they will not leave empty handed.
Is there a right way for an international investor or company to face a tax investigation in Spain?
There is not a right or wrong way to approach an investigation as long as you are well advised. As an international client is fundamental to consider the potential international implications of your tax investigation even if it is not mentioned in the initial queries. Your company or your own tax residence will be always a relevant fact and may play in your favor if considered from the beginning.
You cannot prevent a tax investigation but you can take the following steps to minimize its impact
1. Get International Counsel at outset
2. Disclose all the facts to your adviser, including international ones
3. Do not engage in conversations with the inspector no matter how friendly they look
4. Do not destroy evidences
5. Do not feel pressurize for settlement and be ready to litigate if your believe your rights are affected
… Keep Calm and Drink Tea
After all this business of taxes
started and will always end with a lovely cup of Tea!