Following my recent blog post on the persecutory attitude of the the Spanish Tax Office, known colloquially in Spain as Hacienda, here’s a brief guide on how to fight them. In our experience we have found that if you keep up the fight, you will win- even if you need to take the matter to the Tax Tribunal.
You know things are getting serious when you receive the dreaded letter from Hacienda stating that, in their opinion you owe them further tax, called Propuesta de Liquidacion Provisional. If after replying to Hacienda within 10 days they reject your case, you have one month to lodge an appeal, known as a Recurso.
During this month, the tax debt to them will be frozen. At the end of this time, if the Tax Office does not accept your appeal then they will write to you informing you of this. You have a right to further appeal, but you must pay the tax due, either all at once or by requesting payment by instalments (aplazamiento de deuda) limited to 1 year for individuals or 6 months for companies. Non-payment of tax will lead to late payment surcharges and eventually seizure of assets, normally in the form of a direct charge to your bank account. In Spain your bank has no right to refuse or even question such charges from Hacienda.
Normally by this stage, Hacienda will have sent you a further letter issuing you with a penalty for your original infraction. This is typically 50% of the tax due to them, which is honestly draconian. You have the right to respond and appeal using the same procedure as for the tax due, however the difference here is that the penalty is frozen until you have exhausted all available levels of appeal.
The next level of appeal, and the final one available online without having to use specialised tax lawyers, is the Tribunal Economico-Administrativo. The important thing about this Tribunal is that they are independent from Hacienda. Whereas we have seen that the initial appeal to Hacienda may be rejected because the inspector involved doesn’t want to criticise his buddies, the Tribunal is supposed to be entirely independent. And we have seen this to be the case in practice, where the Tribunal makes a fair ruling in favour of the client who has done nothing wrong.
We have won the majority of our appeals to the Tribunal, including an appeal against the 50% penalty mentioned above, where our claim included the assertion that such penalties are in contravention of EU law.
Unfortunately due to the massive workload and backlog, the Tribunal can take up to around 4 years to make their decision. Until a decision is made in your favour, the State has your extra tax payment in their bank account and will happily make use of it. If your appeal at the Tribunal is successful, the tax will be returned to you with nothing more than a little interest. And of course, no apology from Hacienda.
In one case where we won the Tribunal appeal, we unfortunately find that over one year later Hacienda has still not paid back the overpayment of tax due, and we have had to lodge a communication with them to remind them to repay the money.
So it’s a tough fight, but it must be fought because over the last years Hacienda appears to have become more and more an organ of intimidation and ever more desperate to increase their funds.
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