Tax Inspection and Act Review

Item 20: Tax Inspection Procedure

Concept and Rationale

The Tax Inspectorate verifies taxable facts, ensuring audits are conducted based on thorough investigation. It gathers evidence on taxpayer transactions to ensure proper tax application as intended by law.

Legal Regime

Article 83 of the LGT defines tax application as encompassing all administrative activities, including taxpayer information and assistance, administration, inspection, collection, and taxpayer actions regarding their rights and obligations.

Organization and Powers

Essential Functions

• Investigating tax liability facts to uncover those unknown to the Administration.
• Verifying the accuracy of taxpayer declarations.

Functions

• Verification and Investigation: Checking declaration accuracy and investigating unknown tax liability facts.
• Information Gathering: Obtaining data, reports, and tax documents from individuals and entities (public or private) related to tax compliance. Information can be obtained through supply (general requirements) or gathering (specific requests).
• Limited Testing: Verifying information provided by taxpayers without in-depth investigation.
• Value Checking: Assessing or verifying declared income, assets, and other items.
• Advice and Reports: Advising public administration bodies on economic, financial, legal, or technical matters related to self-inspection. Informing taxpayers about proceedings, rights, and obligations.
• Other Actions: Checking benefit/incentive requirements, tax refunds, and conducting permanent tax audits.

Powers of Inspection (Article 142 LGT)

• Documentation Review: Examining documents, books, records, invoices, correspondence, databases, and other relevant information.
• Property Entry: Entering places of economic activity, property subject to taxation, or where taxable events occur. Requires authorization for entry into residences (natural or legal persons).
• Taxpayer Hearing: Taxpayers must cooperate with the inspection, appearing in person or through a representative. The inspection may require personal appearance in exceptional cases.

Documentation

• Communications: Unilateral notifications from the inspection.
• Measures: Documents recording facts, statements, and circumstances during the procedure.
• Reports: Issued by the inspection, either automatically or upon request.
• Minutes: Documents reflecting the outcome of evidence and research, including a proposal for tax regularization.

Rights and Duties of Taxpayers

Procedure Purpose

The inspection procedure aims to establish and investigate tax obligation compliance and stabilize the tax situation through settlements. Checks focus on declared items, while research aims to uncover unreported facts.

Precautionary Measures

Measures like sealing, custody, or seizure of goods, documents, or equipment can be taken to prevent evidence alteration. These measures are lifted once the motivating circumstances cease.

Initiation

Initiation can be automatic (at the Administration's request) or at the taxpayer's request. Taxpayers must be informed about the nature, extent, rights, and obligations of the proceedings.

Scope (Article 148 LGT)

• General: Covers all elements of tax liability for a specific tax and period.
• Partial: Does not cover all elements.

Taxpayers can request scope extension (Article 149 LGT).

Deadline (Article 150 GTL)

Proceedings should be completed within 12 months, extendable by another 12 months in complex cases or when concealment is discovered.

Place and Time

Determined by the inspection. Can be the taxpayer's residence, place of business, or tax authority offices.

Conclusion

Proceedings conclude with a settlement act.

Item 22: Review of Tax Acts

Concept

Tax administrative acts are presumed valid but can be reviewed and changed if non-compliant with the law. Review can be administrative or judicial, with administrative review being a prerequisite for court action.

Administrative Review

Includes special review procedures, administrative appeals, and economic-administrative claims. Official review includes review of void acts, declaration of harmfulness of voidable acts, revocation, error correction, and recovery of sums paid.

Special Review Procedures

Allows the Administration to review its actions without court intervention. This power is exceptional and subject to limits to ensure legal certainty.

Absolute Invalidity

A void act has no legal effect from the outset. Any person can urge nullification, and courts can appreciate it anytime.

Revocation

The tax authority can revoke acts that violate the law, when new circumstances reveal invalidity, or when proceedings caused helplessness to stakeholders.

Error Correction

Material factual or arithmetic errors can be corrected at any time, without time limits.

Tax Refund Procedure

Initiated for unduly paid funds, such as duplicate payments, overpayments, payments after limitation expiry, or when tax rules stipulate it.

Declaration of Harmfulness of Voidable Acts

Allows the tax authority to declare acts harmful to the public interest and challenge them in court.

Administrative Appeals

Lodged with the issuing authority to reconsider the decision before economic-administrative bodies are involved.

Suspension of Contested Measures

Administrative acts are immediately executable. Appeal filing doesn't automatically suspend execution, but suspension is possible with appropriate security.

Item 23: Tax Infringements and Penalties

Introduction

Tax infringements are punishable by administrative sanctions or penalties. The state's ius puniendi includes preventive and repressive measures to prevent rule evasion.

Principles of Sanctioning Powers

• Legality: Only acts defined as offenses by law are punishable.
• Retroactivity: More favorable procedural rules can be applied retroactively.
• Criminality: Offenses and penalties must be clearly defined by law.
• Accountability: Only responsible parties are sanctioned, even with disregard.
• Proportionality: Penalties must be proportionate to the offense's severity.
• Statute of Limitations: Time limits apply to sanctions.
• Ne Bis in Idem: Prevents double jeopardy for the same offense.

Tax Offense Concept

Tax infringements are fraudulent or culpable acts or omissions penalized by law. Positive characteristics include action, illegality, criminality, and culpability. Negative characteristics are defenses.

Action

Involves human behavior (action, default, or commission by default).

Illegality

Violation of tax legislation.

Typicality

Conduct must fit a defined infringement figure in the GTL.

Guilt

Culpable acts are those the author could have refrained from.

Defenses

• Lack of capacity to act.
• Force majeure.
• Collective decision with dissenting vote or non-participation.
• Erroneous official admission with due diligence.

Types of Violations and Penalties

Slight Infractions

Examples include late submissions without financial loss, failing to report tax domicile changes, or failing to deliver withholding certifications. Punishable by fixed fines.

Serious Infractions

Examples include improper returns, undue benefits/incentives, incorrect deductions, accounting breaches, obstruction, or secrecy breaches. Penalties can be fixed or proportional.

Very Serious Infractions

Often involve fraudulent means, such as substantial accounting anomalies, forged documents, or identity concealment. Penalties are higher, ranging from 100% to 150% of the base.

Specific examples are provided for violations related to disclosure of information, billing, and refunds.