The Tax Agency cannot presume fraud from accounting errors: the TEAC limits the most serious penalties

Incorrect accounting does not necessarily amount to tax fraud. Even where irregularities are significant and exceed the thresholds set by law, the Tax Agency cannot automatically rely on them to impose the most severe tax penalties.

The Central Economic-Administrative Tribunal (TEAC) has set an important criterion for companies, self-employed people and tax advisers.

In its Decision of 22 September 2026, RG 00/51115/2026, issued to unify criteria, the TEAC held that, to classify a tax infringement as very serious on the ground that fraudulent means were used through accounting irregularities, the Tax Administration must give reasons for finding a specific fraudulent intent.

It is not enough to identify accounting errors. Nor is it enough to show that those errors had a significant economic impact.

The difference can amount to thousands of euros in penalties.

The problem: when the Tax Agency confuses an irregularity with fraud

The General Tax Law distinguishes between minor, serious and very serious infringements.

This classification is not merely formal. It directly determines the amount of the penalties that may be imposed on the taxpayer.

For infringements consisting of failing to pay tax due, governed by Article 191 of the General Tax Law (LGT), the penalties may be as follows:

Classification	Penalty
Minor	50% of the amount not paid
Serious	Between 50% and 100%
Very serious	Between 100% and 150%

Classifying conduct as very serious can therefore increase the penalty considerably.

The problem arises when the Tax Agency identifies significant accounting irregularities and considers that their scale alone means that fraudulent means were used.

The TEAC has now held that this reasoning, by itself, is not sufficient.

What exactly does the General Tax Law say?

Article 184.3(a) LGT governs substantial irregularities in accounting and in tax books or records.

The cases provided for by law include:

• Completely failing to meet the obligation to keep accounts, books or records.

• Keeping separate sets of accounts that make it difficult to establish the company’s true position.

• Keeping books or records incorrectly by falsifying entries, omitting transactions or recording them in incorrect accounts in a way that changes their tax treatment.

In this last case, the law requires the impact of the incorrect bookkeeping to exceed 50% of the penalty base.

But this raises the key question:

Does exceeding that 50% threshold automatically establish fraud?

The TEAC’s answer is no.

The TEAC’s new criterion: the Tax Agency must establish more

The Decision of 22 September 2026 specifically considers how Article 184.3(a)(3) LGT must be applied.

The Tribunal held that it is not enough to establish that the accounting irregularities fall within the statutory cases and exceed the required percentage.

The Tax Administration must also explain why specific fraudulent intent is present.

This requirement draws a fundamental distinction:

Incorrect accounting is one thing; deliberately using accounting as an instrument of tax fraud is another.

The Tax Administration cannot simply describe the irregularity, calculate its impact and automatically conclude that a very serious infringement has occurred.

It must explain why the circumstances of the case show that the conduct had this specific fraudulent element.

That explanation must be properly reasoned in the penalty proceedings.

An example: a penalty that could rise from €50,000 to €150,000

Imagine a company being audited for Corporation Tax.

The State Tax Administration Agency (AEAT) identifies accounting irregularities and issues an assessment resulting in additional tax payable of:

€100,000.

Assume that the requirements for a tax infringement are met and that the accounting irregularities exceed the statutory 50% threshold.

The inspectors find that fraudulent means were used and classify the infringement as very serious.

Before any reductions, the financial outcome would be:

Classification	Penalty on €100,000
Serious, statutory minimum	€50,000
Very serious, statutory minimum	€100,000
Very serious, statutory maximum	€150,000

Depending on the applicable classification and adjustment, the difference could be as much as €100,000.

Under the TEAC’s criterion, the Tax Agency cannot justify the very serious penalty solely because the accounting irregularities have an impact exceeding 50%.

It must also give reasons for finding specific fraudulent intent.

If it does not, classifying the infringement as very serious on that particular ground may be legally improper.

Of course, this does not mean that the infringement automatically disappears or that the minimum penalty for a serious infringement must necessarily be imposed.

The final classification depends on the proven circumstances and the other applicable legal provisions.

What is the difference between negligence and fraud?

This is one of the most important questions in tax penalty law.

Article 183 LGT provides that tax infringements may result from intentional or negligent conduct, including any degree of negligence.

Therefore, proof of a deliberate intention to defraud is not required for certain tax penalties to be imposed.

Negligent conduct may be punishable.

However, when the Tax Administration seeks to apply an aggravated classification based on the use of fraudulent means through accounting irregularities, the TEAC requires additional reasoning.

It is not enough to show that the taxpayer acted incorrectly. Nor is it enough to say that the taxpayer should have known their tax obligations.

The specific fraudulent element required for that classification must be justified.

This distinction prevents three different situations from being automatically treated as the same:

Accounting error. An entry may be incorrect without there necessarily being a punishable tax infringement.

Punishable negligent conduct. A culpable breach of tax obligations may constitute an infringement without necessarily involving the use of fraudulent means.

Fraudulent conduct. Accounting may have been deliberately used to distort the tax position, provided that this conclusion is sufficiently established and reasoned.

The TEAC requires the Tax Agency to keep these categories distinct.

Why the reasons in the penalty decision matter

The decision has an immediate practical consequence.

In any penalty proceeding where the Tax Agency alleges the use of fraudulent means through accounting irregularities, the penalty decision should be examined carefully.

This is particularly important where the Tax Administration merely states:

• That transactions were omitted.

• That certain income or expenses were recorded incorrectly.

• That the irregularities changed the tax result.

• That their impact exceeded 50% of the penalty base.

All these factors may be relevant. But under the new criterion, they do not by themselves replace the obligation to give reasons for specific fraudulent intent.

The Tax Administration must explain what established circumstances support the conclusion that the irregularities reflect a fraudulent use of the accounts.

This does not require a confession from the taxpayer. Fraudulent intent may be established by direct evidence or sufficiently strong circumstantial evidence.

What the Tax Administration cannot do is presume it automatically from the mere existence of the irregularities and the statutory percentage.

Can a penalty be annulled even if the tax assessment is correct?

Yes. A tax assessment may be legally correct while the penalty is not.

These are separate matters.

The assessment determines the tax debt payable. A penalty additionally requires the objective and subjective elements of a tax infringement to be present, and the classification must be properly justified.

A taxpayer may therefore have to pay an additional tax assessment while still having legal grounds to challenge the penalty.

It is also possible that punishable conduct occurred but that the Tax Administration incorrectly classified it as very serious.

The fact that the Tax Agency is right about the tax assessment does not necessarily mean that it is right to impose the highest penalty.

What about penalties that are already under appeal?

The decision is especially relevant to penalty proceedings that are still open.

Where a very serious penalty based on accounting irregularities is disputed, it should be checked whether the Tax Administration properly explained the specific fraudulent intent.

If it did not, the TEAC’s criterion may provide a significant argument against that classification. This may matter in pending economic-administrative claims and court proceedings.

However, the decision does not automatically annul penalties that have become final.

Nor does it mean that every very serious penalty based on accounting irregularities is improper.

Each case requires an examination of the facts, the available evidence, the reasons given by the Tax Administration and the specific statutory aggravating ground applied.

A particularly important decision: unification of criteria

Another aspect reinforces the importance of this development.

This is not simply an isolated TEAC decision. Decision RG 00/51115/2026 was issued in extraordinary proceedings to unify criteria.

Under Article 242 LGT, this gives its doctrine particular significance for the work of economic-administrative bodies and the tax authorities.

The criterion sets out a clear requirement:

The Tax Administration must justify both that the accounting irregularities meet the statutory requirements and that the specific fraudulent intent exists to classify them as fraudulent means.

This is therefore a doctrine of practical importance for the administration of tax penalties.

What should companies and tax advisers review?

In light of this decision, penalty files concerning very serious infringements deserve particularly careful review, especially where the Tax Agency relied on incorrect accounting to establish the use of fraudulent means.

The review should distinguish four questions:

First: Do the accounting irregularities actually fall within one of the cases in Article 184.3(a) LGT?

Second: Has their impact been calculated correctly and, where applicable, does it exceed the statutory 50% threshold?

Third: Has the taxpayer’s culpability been sufficiently reasoned?

Fourth: Has the specific fraudulent intent that justifies the aggravated classification been separately explained?

This final element is precisely what the TEAC’s decision makes particularly important.

Before appealing a penalty, it is also advisable to assess how the challenge could affect any statutory reductions, particularly those under Article 188 LGT.

Conclusion: the Tax Agency must prove fraud, not presume it

The TEAC Decision of 22 September 2026, RG 00/51115/2026, establishes an important criterion in tax penalty law.

Incorrect accounting may justify a tax adjustment. It may also constitute a punishable tax infringement where the statutory requirements are met.

But it does not automatically justify classifying an infringement as very serious on the ground that fraudulent means were used.

When Article 184.3(a)(3) LGT is applied, the Tax Administration must give reasons beyond the existence of accounting irregularities and their economic impact. It must justify the specific fraudulent intent.

The distinction is fundamental. In penalty matters, it is not enough to show that a taxpayer made a mistake or failed to meet tax obligations.

To impose an aggravated penalty for accounting fraud, the Tax Agency must explain why the conduct merits that particular classification.

That requirement may make the difference between a serious and a very serious penalty, with exceptionally significant financial consequences for companies and taxpayers.