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General Tax Control Plan 2011

15-02-2011
The General Guidelines for the General Tax Control Plan 2011 has been published on February 7th in the BOE.

Under this long-established title the criteria that will govern the actions and controls of the Tax Inspections and other groups within the Tax Office will be found.

Besides other issues it is established that certain emphasis will be placed on sectors and activities by the Tax Authority, without disclosing any precise instruction about the functioning of this group, as it is confidential and submitted to secrecy.

At Cyclo we tried to summarize briefly what will be the main guidelines as we thought there would be no harm in knowing them and sharing them with our customers:

a) Professional activities .- The external signs of wealth and other sources of information will be paramount in this case, by comparison with the declared income of professionals. A computer software will be designed, that in connection with notaries and other administrations (it occurs to us maybe ¿Traffic?), can automatically detect such signs.

b) large-denomination banknotes and bank movements of importance.

c) Subcontracts and fraud .- In connection with Social Security, trying to find those companies that issue false invoices without having anyone registered with the Social Security.

d) Detection of Income obtained in Spain by the non-resident account holders.

e) Modules- Big surprise, again affecting fiscal individuals with modules, among various reasons, one for being a source, in some cases, for false invoices. The connection of these businesses directly with others will be studied.

f) Collaboration with Social Security in the detection of the shadowy economy.- Shares, exchanges with the Social Security of the census in both organisms, new declaration of energy consumption (model 159) that will help detect excessive consumption on premises or empty homes, new statement credit card terminal (model 170, in which banks must declare where they have installed the POS and the volume that it generates), imports from Asia, etc, are set to be the elements of what the tax Authority would like to grasp to detect undeclared activities or Billing.

g) Battle against the abuse in Fiscal Engineering and Planning - Concealment of assets through trust structures, opaque financial products, intra-group financial expenses to reduce taxable income subjected to be paid in Spain, etc. Emphasis will also be the location of assets (which until now have been called tax havens), opening that many of these areas are underway and which promotes the knowledge of asset holders and financial products (lets not forget Switzerland).

h) The usual Control of Transfer Pricing- This item constitutes one of the greatest struggles of the Tax Authorities of the world, since the improper transfer pricing (international payments between companies of the same group or society and its branches, or vice versa) promotes, in fact, that multinationals differ the taxation to developing countries who have a the lower tax rate. Thus, a high tax base in Spain, for example, could be offset by applying a high price for the goods received from another country that even without being a manufacturer does have a lower corporate tax rate. Thus 30% (if that were the case) that is saved in Spain by reducing the taxable income for that fictitious greater expense, it would represent an increase of the tax base in the country of origin for goods, which could be taxed at 10%, for instance, which would mean the multinational has saved 20%. There are international agreements to control these transfer prices and Treasury will be putting more emphasis on controlling this year.

i) Intra-community VAT Patterns .- Emphasis will be placed on this issue, which will mean, if anything, greater control of the Operators VIES (intra-communitarian) and even more restrictions on registration of this regime. Those of us who work in this field have seen how this some what easy process of registering companies that buy merchandise from the rest of the EU in order not to pay VAT in those countries, and only the Spanish (VAT is not deductible elsewhere in Spain) has become an ordeal because of the implementation plans for detection of large sums of VAT, therefore it is taking up to several months (sometimes up to six) to register, expecting the company in question to delay the start of activity during this time if you do not want to pay foreign VAT. Everyone gets tarred with the same brush.

j) Control within Collections – Along with the usual tax collection effort agency they will be joined by the part of Inspector to facilitate the effective collection of tax debts. That is, in other words, to bring the Inspector down to the day to day reality and for him to be implicated in for-seeing the possibility of bad debts during the inspection process and take note of such, if possible, preventive measures aimed at effective recovery of debt of both the principal debtor and, we fear, also of the responsible solidarity and subsidiary.

Other actions will include: the control of systematic violators of tax obligations, monitoring of apparent insolvency, bankruptcy process control (left unattended as far as tax control is concerned), tax fraud, impulse to the derivations of responsibility and precautionary measures, control of taxes assigned to Autonomous Communities, etc.

We leave you with this list of possible actions taken by the Tax Authority, as it does not hurt to have a bit more knowledge of these issue. If you anyone has any questions please, do not hesitate to contact us for more information.

Cristobal Ruíz Marín
Tax Advisor

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