‘The resolutions of the Spanish Economic-Administrative Court become binding doctrine for the entire tax agency’, said Carlos Gómez, Deputy Director General for Taxes at the conference ‘The relationship between the Spanish Tax Agency and taxpayers: moving towards legal (un)certainty?’ organized by ESADE Law School in collaboration with Crowe Horwath Legal y Tributario. Eduardo Berché, dean of ESADE Law School, delivered the opening remarks. The session brought together magistrates, tax inspectors, tax advisers and university lecturers to discuss current tax issues from the dual perspective of both the Spanish Tax Agency and taxpayers.

‘Related-party transactions have attained a level of maturity; they are widely asked about by auditors, minority shareholders and trade unionists’, said Jordi Bech, president of Crowe Horwath. In his talk, he cited various methods recognised by the Spanish Tax Agency (AEAT) for establishing prices in related-party transactions, that is, transactions between companies belonging to the same group or conducted between relatives up to the second degree of kinship. In his view, ‘It is a fact that there are methods accepted by the AEAT, which can be used to justify the prices at which transactions are performed and thus ensure that they are not a covert activity or an activity used to simulate a business activity. However, even when the recognised methods are used, the tax agency’s approval is not always obtained.’ ‘This generates a feeling of legal uncertainty in business owners’, he explained. Even ‘the Organisation for Economic Co-operation and Development (OECD) has issued a number of recommendations on the need to provide legal certainty in order to boost economic activity’, Bech underscored.

According to José María Remacha, a state tax inspector, ‘There has never been much legal certainty, because there is no single answer for the tax agency and for taxpayers.’ ‘There needs to be a fluid relationship of cooperation between the tax agency and taxpayers’, he added. ‘Companies clearly need certainty, but in the matter of related-party transactions, the AEAT is seeking to help establish a price, not to tell anyone how to run their business.’ Amongst other interpretive criteria used to establish transaction prices, Remacha noted ‘ensuring a consistent rationale, not comparing prices with companies turning profits in markets with losses, using databases with accounting information and comparing products in the same category’. He also suggested that the best way to approach the relationship with the tax agency is ‘for the taxpayer to explain his or her truth before anyone else’ and ‘to justify business transactions at the time they are performed, setting a price policy in time as opposed to after the fact’.

With regard to tax offences and criminal proceedings, Joan Iglesias, a partner at Crowe Horwath and a state tax inspector on leave, examined the history of forty years of tax offences in Spain, expressing concern at the lack of a stable criterion regarding the model for the relationship between the tax agency and criminal justice bodies. Regarding the degree of legal certainty, Iglesias argued that ‘the tax system must be perceived as fair, but this is unlikely to happen if it does not ensure legal certainty; without that, there is arbitrariness and no law or true justice’. In his view, the origin of most problems related to the interpretation of rules for the procedure to be followed lies in the fact that criminal judges are required to apply tax rules to determine whether or not an offence has been committed against the Public Treasury. This leads to serious distortions in the application of traditional criminal law concepts, such as preliminary judgments, lis pendens and res judicata, and can also violate the fundamental right to the ordinary judge predetermined by law, recognised under Article 24 of the Spanish Constitution.

According to David Velázquez, a lecturer at ESADE Law School and a magistrate on leave, ‘The lapsing of a tax offence should not leave room for legal uncertainty, extending the calculation of the limitation period forever.’ ‘Currently, in cases of self-assessment, tax offences are committed when the legal deadline for filing the return is reached; that is when the limitation period begins.’ Furthermore, ‘the last chance to regularise is once there is proof that the taxpayer has been notified by the tax agency that an audit will definitely be performed; the situation must be regularised before that’. The ESADE lecturer concluded with a reflection on two key aspects: ‘first, those with more resources can achieve an advantageous position in the negotiation of an approval or the application of extenuating circumstances, as they can more easily pay their debt immediately, and, second, companies have a new means of proof, as they can cite compliance as grounds to exclude responsibility; however, they have to convince the criminal judge of the plan’s effective implementation and of the existence of an internal culture of compliance’.