Spanish Tax Law: Prepayments, Sanctions, and Verification

Tax Prepayments and Payments on Account (Art. 23 LGT)

Payments on account, in accordance with Article 23 of the General Tax Law (LGT), involve satisfying a tax amount where the taxpayer is forced to make installment payments for retainers or the obligation to make payments on account. This tax liability is autonomous with respect to the principal tax liability.

Entities Required to Retain or Enter on Account

In general, the following entities are required to retain or enter on account as income subject to this obligation:

• Legal persons and other entities, including communities of owners and entities subject to income attribution.
• Taxpayers carrying out economic activities as they meet income requirements in the exercise of their activities.
• Individuals, legal entities, and other non-resident entities operating in Spanish territory, whether through a permanent establishment or not, in certain cases.

Advance payment has been configured as a separate obligation; it makes sense within the context of income tax. If the employer does not fulfill the requirement to withhold income tax, the Treasury will take action against them.

Tax Disciplinary and Prosecution Procedures

The disciplinary procedure shall always be initiated by referral from another process, such as an inspection, collection, or management procedure. The general principles of legality apply to all offenses by law. Typically, while there is a criminal penalty, responsibility for committing an offense requires intent or even guilt. Furthermore, the penalty must be proportionate to the damage caused, and retroactivity never occurs in sanctions.

The process always begins automatically within three months of notification. Offenses are classified as minor, serious, or very serious.

Development involves setting the file manifest within 15 days, during which the party may provide arguments, evidence, and a draft resolution. The proceedings end with a resolution indicating the type of offense (mild, severe, or very severe) and the fixed penalty, ensuring the sanction is proportionate or ancillary. This is regulated under Articles 22, 23, and 24 of the RGS.

Limited Verification Procedures

Initiation must be official and can be effected by both management bodies and the inspection department.

Objects and Means of Verification (Art. 136.1 LGT)

According to Article 136.1 of the LGT, the following means may be used for verification:

• Data reported by the obligor in their statements.
• Data held by the Administration that is undeclared or different from reported figures.
• Examination of books and records required by tax regulations or official documents, excluding commercial accounts.
• Requiring third parties to provide information as required by law.

Regarding limited commercial accounts, the administration cannot request third-party financial information on movements, and these procedures may not be conducted outside of the Tax Administration.

Processing and termination of the proceedings shall be documented through diligence and communications. The obligor must appear in person on the required day and time, providing the requested documentation. Termination occurs via express resolution, revocation, or the initiation of an inspection.