How should companies face a tax audit or tax inspection in Spain?
There are different types of tax audits or inspections done by the Spanish Tax Office. However, they all serve to ensure that a company has paid its taxes correctly and in the correct amount within a certain period of time.
Whatever the reason for the tax audit is, it is important that the company is aware of the measures to be taken to deal with the audit and to determine its scope.
Hardly any other field of law is as complicated as the subject of taxes. That’s why only a few companies survive a tax audit without additional payment. Only if you are well prepared you can face the deadline calmly.
What is the tax audit?
Every company in Spain, but also self-employed persons and freelancers, have the obligation to provide the tax office with information about their income, their sales, their turnover tax receipts and other acquisitions. The taxpayer or the company submits the information to the tax office by means of the tax return for the individual different types of tax, such as income tax, turnover tax or corporate income tax. Taxpayers determine their taxable amounts on their own and submit them to the tax office.
The tax audit is a review of the tax information provided. In this way, the tax auditor sent by the tax office determines whether companies are declaring their tax returns truthfully or whether there is undeclared work, money laundering or tax evasion. In the course of a tax audit, the tax office checks whether the information in the tax return agrees with the figures from the bookkeeping. In addition, the supporting documents are examined for their validity.
General and partial tax audit
Different countries and jurisdictions may have different laws and requirements and therefore a different tax audit process.
The conduct of a tax audit can be of a general or partial nature. Unless expressly stated otherwise, it is usually a general tax audit.
If it is a partial tax audit, the company has 15 days to request the extension. In this way, once the inspection has been completed, it can be assumed that it is binding for all tax periods.
Measures in the event of a tax inspection
Upon receipt of the notification, the following actions shall be taken:
- Verification of the tax situation and the status of the accounting documents.
This will make it possible to identify potential risks in advance and, if necessary, to attempt to resolve or reduce them.
- Review of significant operations or transactions.
Where operations of a special nature (e.g. corporate restructuring) are involved, it is important to carry out a thorough analysis of the transaction and its documentation.
- Preparation of the documents to be handed over.
Proper preparation of the documents to be handed over can facilitate cooperation with an inspection.
- Review of administrative decisions in inspection procedures.
The administrative decisions must be carefully examined before any further legal action is taken and you also have to evaluate very carefully the effects of accepting or not the result of the inspection.
Although the visitors announce themselves in advance, they are very curious and ask their hosts probing questions. They look at internal documents and want to know many details. This costs the companies time and nerves, sometimes a lot of money. The effort for tax audits is worth it for the tax authorities. They are an important source of income.
Tax audits are a worthwhile business for the tax authorities because even large companies with experienced specialists do not always find their way through the jungle of taxes. If a company gets a new legal form, changes or internationalizes its business model, introduces new IT systems, is restructured or taken over by the competition – almost always these steps have consequences for the tax authorities that are hard to understand. Danger lurks even in the case of longer business assignments abroad or when choosing the right VAT rate.
Tax audit and investigation measures can be complex for companies. It is therefore advisable to seek advice from specialists in tax matters when it comes to different types of audits like an income tax audit, transfer pricing audit, VAT audit, crypto tax audit, self employed audit, a corporate tax audit or others.
It is expressly pointed out that you should not face a tax audit without professional support and advice from Spanish tax consultants. If you are subject to a tax audit in Spain, we can assist you with our experience and knowledge. Our tax consultants will be happy to help you. You can contact us by email or phone.