What to do if you’re facing a tax inspection in Spain
Being told you're up for a tax inspection in Spain can be particularly dauting as a foreigner, especially if you're self-employed. Here's how to act, what documents to provide and other useful advice.
Typically, a tax inspection is prompted by a specific incident or if you run a business that is under the Spanish tax agency's scrutiny for fraud control. This includes sectors where you often receive cash payments rather than bank transfers.
You may also be targeted if you regularly receive VAT back from the authorities rather than having to pay more or if you're under Spain's Beckham Law tax regime. Unfortunately, these are both true for many foreigners here who work for companies abroad.
READ ALSO: How does Spain’s tax agency detect fraud?
If you do receive a letter from Hacienda's tax inspection unit, it’s important to read the document carefully to understand all the implications.
The letter will detail the reason for the inspection, the years they are inspecting and the information required, as well as the deadline for responding. It’s very important to make sure you respond by the deadline or you could face fines.
The first step is to start organising all your documentation which includes invoices, receipts, tax returns, statements from your bank etc. Ensure that everything is up to date and store them all together so you can find them all in one place.
In Spain, you are obliged to keep all your documents and receipts for a period of six years, because inspections can go back this far.
READ ALSO: What Americans should know about Spain's Beckham Law tax regime
Secondly, you should go over all your numbers and calculations to make sure that everything is correct and there aren't any errors. If you have a gestor, you may want to contact them too to check all the calculations they’ve submitted are correct, as they can make mistakes too.
Prepare you answers in case you have to justify certain expenses for your business, large cash transactions etc. If you don’t have a gestor or accountant, you may want to contact one as they can help you prepare and anticipate what questions and information the Tax Agency will need.
Occasionally inspectors may come to your place of work to conduct an on-site inspection, but they will only be able to do this if it’s a place open to the public such as a café. If you work from home, they will have to have an administrative or court order if they need to inspect anything in person.
Once you have got everything in order you will usually send your evidence digitally or in the post, without having to go in person. Sometimes, however, you may have to go in for an interviewing or questioning.
READ ALSO: How to complete Spain's Declaración de la Renta tax return
The Treasury will notify you of the outcome within a certain amount of time and will let you know if everything is correct, if they need any more information or if you owed more money.
It’s important to answer any questions they have confidently and to stay calm, so you can show them you’re on top of the situation.
They will send you settlement with a result to be paid and typically offer a reduction if you accept it without filing any objections.
If you do feel that the result is wrong, however, you can file an appeal. Be aware though, that this could result in a penalty fine.
Once everything has been finalised and paid, it’s essential that you keep all documentation organised and easily accessible in case they contact you again in the future. This means keeping all records of correspondence with the Tax Agency and the final result.
If you're unsure about anything, contact a professional as they can advise you better for your particular situation.
READ ALSO: What are the fines and prison sentences for tax evasion in Spain?
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