The Supreme Court Ends the “Third Shot”: Clear Limits on Spain’s Tax Inspectors

The Supreme Court Ends the “Third Shot”: Clear Limits on Spain’s Tax Inspectors

In a major tax-law ruling, the Spanish Supreme Court (Third Chamber, Second Section) has set clear limits on the Tax Agency’s ability to issue repeated assessments after earlier ones have been annulled. The Court has closed the door on what has been called Hacienda’s “third shot.”

1. What does “third shot” mean in practice?

For years, practitioners have referred to the “two-shot” doctrine: after a first assessment is annulled by an administrative tribunal or court, the Tax Agency may issue a second one, subject to limitation periods and the reviewing body’s directions. The problem arose when the Agency tried to issue a third or later assessment, sometimes by declaring the proceeding time-barred and starting a new one.

The Supreme Court has ruled that this third shot is not allowed. Once the first assessment has been annulled and a second assessment has been issued, the Agency may not issue a third or any later assessment, regardless of the defect alleged in the second one.

2. Legal grounds for the doctrine

The Court relies on core principles of administrative and tax law:

• Legal certainty: taxpayers must be able to know when a tax dispute has ended and should not face repeated collection action over the same facts indefinitely.
• Good administration and good faith: the authorities cannot benefit from their own mistakes or shift the cost of those mistakes onto taxpayers without end.
• Abuse of rights: the tax system cannot permit the authorities to repeat burdensome acts “until they get it right” at citizens’ expense.

The power to issue a second assessment exists to correct the first assessment’s defect. The Court found no legal provision authorising a third or later assessment after the second has also been annulled.

3. The case behind the ruling

The judgment of 29 September 2025 (appeal 4123/2023) concerned inheritance tax administered by the Galician Tax Agency. It involved as many as four assessments for the same taxable event:

1. The Regional Economic-Administrative Tribunal annulled the first assessment for inadequate reasoning.
2. The Agency issued a second assessment to comply with that annulment.
3. After declaring the proceeding time-barred, the Agency opened a new one and issued a third assessment.
4. The High Court of Justice of Galicia ordered a fourth assessment, which was also challenged.

The Supreme Court annulled the assessments issued after the second, holding that the Agency’s power to repeat an annulled act is exhausted with the second valid assessment.

4. Practical effects for taxpayers

• Procedural certainty: after two assessments have been issued and annulled, the Agency cannot try a third one over the same disputed circumstances.
• Expiry cannot reset the process: declaring a proceeding time-barred and opening a new file does not legitimise a third assessment.
• Less procedural and financial strain: the ruling reduces the burden of repeated action unsupported by a sound legal basis.
• Stronger tax defence: taxpayers have firmer grounds to challenge later assessments and, where appropriate, seek accountability if the Agency continues beyond these limits.

5. Wider significance

The ruling is consistent with a broader European and academic trend towards limiting repeated administrative acts that impose burdens. Because it rests on general principles of administrative law, its reasoning may also be relevant beyond taxation.

Conclusion

In its judgment of 29 September 2025 (appeal 4123/2023), the Supreme Court strengthened legal certainty in Spanish taxation. At most, the Tax Agency may issue two assessments for the same taxable event: the original and one replacement following its annulment. There can be no “third shot.” The doctrine reinforces taxpayers’ position against repeated administrative action without a solid legal basis.

Read the original article in Spanish.