Accepting improper penalties. The taxpayers' dilemma in the face of confusing signals from the Tax Administration.

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Published on

29/03/2022
Blog

Recently the DGT (Dirección General de Tributación) initiated a plan to encourage the filing of pending tax returns, with the purpose of avoiding the implications of the assignment of "Temporary Discharge" status for taxpayers. The "Temporary Discharge" is the tax status assigned to those who in the last three fiscal periods or more have not filed the tax returns for the taxes in which they are registered as taxpayers. This seems reasonable, as it would be reasonable for taxpayers to react to such action by the State.

What happens is that the DGT urges not only to get up to date but also threatens (urging and threatening are terms with very different connotations) that if you do not do what the official requests (even if the official is not right) much more severe sanctions will be applied even though they may be unfounded. Therefore, no one is sanctioned automatically, but after a due process where the authority and the taxpayer expose their points of view.

The DGT considers, in my opinion, erroneously, that companies whose activity is to be a lender or investor and whose income (interest) is taxed as income from movable capital, must file VAT returns at zero (because the interest is not taxed with VAT), since it is a case of exemption and not of non-taxation. Such interpretation, which has not been consistent over time and which varies from taxpayer to taxpayer, has led to try to impose millionaire fines to companies that do not file VAT returns, because the law does not tax such income with VAT and then the decision to file at zero, is based only on an IT consideration. These taxpayers are not profit tax payers, and their income, interest, is not taxed, why then or under what legal concept are they taxed? No, they are not taxed, but whoever does not comply with the formal duty, formal duty to declare in ZERO, is penalized.

And after that, they invite and threaten to pay some months of penalty. It is time to review such procedures and to respect the rights of taxpayers.

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