BackThe Spanish Supreme Court has ruled that the Spanish Tax Authorities cannot initiate inspections against taxpayers once the four-year administrative prescription period has expired. This decision prevents the Spanish Tax Authorities from using criminal proceedings to extend its auditing powers beyond the legal limit.
The ruling invalidates a strategy previously employed by the Spanish Tax Authorities, which consisted of accusing taxpayers of tax offenses in the fifth year to delay the statute of limitations and thus justify the opening of new investigations. In this way, the Supreme Court strengthens legal certainty for taxpayers and limits the Inspection Department’s powers in cases where the administrative prescription has already taken effect.
Limits on the Spanish Tax Authorities’ investigative powers
The Supreme Court magistrates interpret article 115.1 of the General Tax Actand conclude that the Administration may only investigate prescribed tax years when strictly necessary to verify non-prescribed taxes or to assess the offsetting of tax bases and deductions applied. This stance contradicts the Spanish Tax Authorities’ argument, which advocated for unrestricted investigative powers as long as the tax offense had not expired.
The Supreme Court also rejects the Spanish Tax Authorities’ claim that administrative prescription does not affect criminal courts’ authority to prosecute tax offenses. The ruling clarifies that tax audits must comply with prescription deadlines and that any evidence obtained beyond those limits is invalid.
Impact and jurisprudence
This ruling represents a setback for the Spanish Tax Authorities, which must now adjust its inspection procedures to align with the legally established time frame. Moving forward, investigations into the fifth year will only be possible if an audit was already open before the fourth year expired and if there is reason to believe the same fraudulent practice continued.
The Court also reinforces its jurisprudence by citing a previous ruling (STS 586/2020), in which a conviction was annulled because the investigation was conducted beyond the legal time frame. This precedent strengthens taxpayer protections and sets a clear limit on the Spanish Tax Authorities’ powers.
B Law & Tax International Tax & Legal Advisors.
“At B LAW&TAX we are specialists in international tax advice for both companies and individuals. If you would like further information, we will be pleased to assist you at 917817194 or info@blaw.es”
