The different procedures initiated by the Tax Administration with respect to taxpayers’ obligations are regulated in Law 58/2003, of 17 December, General Tax Law (hereinafter, “LGT“).
In this post, we will summarise the main characteristics of tax management and tax inspection procedures, as well as their most important differences in theory and in practice.
The tax management procedures, which are regulated in article 117 and following, the LGT:
- Refund procedure (“Procedimiento de devolución”): initiated by means of self-assessment, application, or communication of data: for amounts paid or duly supported by the taxpayer.
- Procedure initiated by declaration (“Procedimiento iniciado mediante declaración”): this is almost obsolete given that most taxes are currently settled by self-assessment.
- Data verification procedures (“Procedimiento de verificación de datos”): these occur when there may have been formal defects on the part of the taxpayer, the return does not coincide with other data provided by the taxpayer or there is an improper application of the regulation.
- Limited verification procedure (“Procedimiento de comprobación limitada”): in this case, a more exhaustive examination is carried out than in the data verification procedure, as it usually requires the submission of records and documents to verify the taxpayer’s correct declaration.
- Value verification procedure (“Procedimiento de comprobación de valores”): in which the taxpayer’s valuation data is checked request, the most typical being the Contradictory Expert Appraisal (“Tasación Pericial Contradictoria”).
Tax management procedures are general and broad in nature, including, among other areas, census, certificates, or issuance of taxpayer identification numbers (NIFs), among others.
In practice, they are characterised as procedures in which there is no direct dialogue between the taxpayer and the public servant in charge of the file. This is because most of the time it is an exchange of letters between these two parties in which the taxpayer often has the feeling that the Administration is not paying the necessary attention to the explanations provided by the taxpayer.
This feeling, which in extreme cases can end up causing defencelessness (“indefensión”) to the taxpayer, has increased with the crisis caused by the COVID-19 pandemic, given that changes have been introduced in the functioning of the Administration so that most actions must be carried out online. Telephone assistance is almost non-existent, and it is difficult for taxpayers to go to the Administration’s offices.
On the other hand, the tax inspection procedure, which is regulated in Articles 141 and following, the LGT, has a broader scope than the tax management procedures, given that its actions extend to checking all types of goods, elements or operations that are necessary to verify the correct declaration of the taxpayer’s tax obligations.
It is a procedure that is initiated by the Administration, at which time the taxpayer must be informed of the date, time, and place of the inspection, as well as the scope of the inspection and the taxpayer’s rights and obligations.
After the initiation of the procedure, there is an instruction phase, which is carried out by the inspector and concludes with the formalisation of the tax assessment report, and a resolution phase, which ends with the drafting of the tax assessment report.
There are three types of reports that bring the inspection procedure to an end:
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- Agreement (“Actas con acuerdo”): after negotiation between the parties, an agreement or settlement is reached.
- Conformity (“Actas con conformidad”): the taxpayer agrees with the assessment report drawn up by the Administration.
- Disagreement (“Actas con disconformidad”): the taxpayer disagrees with the report drawn up by the Administration.
In tax inspection procedures, unlike in the tax management ones, the taxpayer’s relationship with the Administration is more direct and personal, given that there is greater interaction between the parties. This is undoubtedly a positive aspect, although it does not ensure a more beneficial outcome at the end of the procedure.
Special mention should be made of the relevance of the hearing and disclosure (“trámite de audiencia y puesta de manifiesto”) of the file, which has been interpreted by case law and doctrine as a procedure that goes beyond mere allegations, given that it implies that the taxpayer may have access to his file, in an advanced or finished state, and that, after studying it, he may submit the documents and make the explanations he deems relevant before the end of the procedure.
The elimination or undermining of this procedure is considered to lead to defencelessness. However, the practical reality is not so simple because, in this procedure, the taxpayer is not given full access to the details of the inspection proposal, which makes it very difficult for the taxpayer to argue and provide the corresponding documentation, possibility that with detailed access to the full contents of the assessment report could be carried out.
On the other hand, not knowing the details of the settlement proposal, it is also difficult for the taxpayer to determine whether he/she agrees with the proposal received.
Finally, it should be noted that following the approval of Law 11/2021, the anti-fraught Law, the reductions in penalties have been increased with the aim of reducing litigation. In particular:
– The reduction applicable to cases with agreement (“actas con acuerdo”): from 50% to 65%.
– The reduction for prompt payment (“pronto pago”): from 25% to 45%. This reduction cannot be added to the previous one.
On the other hand, the reduction applicable to cases of conformity (whether in data verification or limited verification procedures, or inspection procedures), remains at 30%.
The increase in the reductions in penalties, although it may seem to have a positive effect on the taxpayer’s pocket, is intended to encourage the acceptance of administrative regularisations and to push the taxpayer not to appeal, which, in some cases, could cause financial damage to the taxpayer.
If you have any doubts related to this or other tax, accounting, or legal issues, please do not hesitate to contact our tax advisors in Barcelona.
