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Tax Agency will strengthen the control of large fortunes 2017

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The Tax Agency will strengthen the control of large fortunes Directives of the Annual Tax Control Plan


* Newly created ad hoc computer tools will reinforce inspections of large estates, facilitating access to aggressive fiscal planning, the use of intermediary companies, displays of purchasing power beyond the amounts declared and availability of assets abroad

* On-site inspections in sectors with greater risk of VAT fraud will promote the fight against the shadow economy, which will be coupled with a subequent follow-up of regularised taxpayers to ensure there is a permanent broadening of the tax bases

* Special attention will be paid to inspecting entities operating internationally in the digital economy field to ascertain the possible existence of actions aimed at excluding Spain from the payment of direct taxes due   26 January 2017.- 

The Tax Agency will promote the inspection of high net worth individuals using new IT tools created specifically to improve knowledge and selection of risks pertaining to large estates.

These measures, together with a reinforcement of the fight against the shadow economcy, particulary in the VAT field, and the regularisation of elusive practices in the area of international taxation, will be areas of special relevance for the Tax Agency in its 2017 Tax Control Plan, the general guidelines for which are published tomorrow in the Official State Gazette.

Controlling the assets of high net worth individuals requires the use of sophisticated tools of analysis to investigate and understand complex financial and corporate frameworks. With the existing tools, in the past five years, for instance, the Tax Agency has collected tax debts totalling over 400 million euros from individuals with net worths of over 10 million euros.

The Agency plans to make a qualititative improvement in the control of assets, using the newly created ad hoc computer tools that facilitate risk analysis and inspections of large estates, analysing changes in net worths and transfers of income made using aggressive techniques based on tax planning, the use of intermediary companies to channel personal gains, displays of buying power that are not consistent with personal income tax returns and availability of assets abroad.

In addition, in 2017 control actions will be developed based on information obtained within the framework of the FATCA Agreement on Spanish residents holding accounts in the United States and, at the end of the year, through the CRS form, the information will be added to accounts from 54 tax jurisdictions, with the same commitment from 2018 for 47 more.  

Asset investigation based on 720 and 750 This information will feed into the Agency's databases, reinforcing the already notable improvement in the asset analysis process, detecting tax risks and broadening the tax bases with information obtained from the Special Tax Return -form 750- and the informative Return on assets and rights held abroad -form 720-.

Particular attention will be paid to the exploitation of information on transactions with territories under taxation, spontaneous communications from third states, opaque structures with international elements and ficticious locations in tax addresses abroad, all of which is included in the asset analysis procedures covered by forms 720 and 750, and the rest of the comparative information available regarding taxpayers showing signs of shadowing.  

VAT and the fight against the shadow economy Similarly, on-site inspections at the premises of the taxpayer where the economic activity is carried out will be intensified, in order to verify and regularise situations of under-declaring of income. In particular, in 2017, the Tax Agency shall undertake actions within sectors in which greater levels of risk of VAT incompliance are detected, reinforcing the presence of the Agency in relation to activities involving retail sales to the end consumer.

Furthermore, the Agency intends to extend its actions in all those sectors in which there is perceived to be a particularly high level of shadow economy in place, checking subsequent tax behaviour patters in order to permanently broaden the tax bases over time. In addition, the Agency will reinforce the analysis of the real purchasing power of taxpayers, combining the contrast of information declared on assets and rights with informaiton on management of current accounts and inconsistencies with formal ownership, beneficiaries of credit cards issued in Spain and abroad and the use of cash, whilst also maintaining the actions carried out to verify compliance with limitations on cash payments. At the same time, the Agency will reinforce the analysis of commercial software used to conceal sales, in the framework of the strategy being implemented to develop selective coordinated actions at national level to combat fraud linked to the use of this software.  

Multinational tax evasion In the area of international taxation, throughout 2017, the Tax Agency will work on developing risk analysis models that will enable anticipating and optimising the use of the information that will start to come in this year on tax rulings and, in 2018, on 'Country by Country' reports, for which the experience accumulated by the National Office of International Taxation since its creation in 2013 will prove especially relevant.

All of this will lead to a substantial increase in the information available to the Tax Agency regarding the taxation of multinationals operating in Spain. During 2017, the Agency will focus its attention on the correction of elusive practices by multinationals according to BEPS risk areas (Base Erosion and Profit Shifting) of the OECD. Particular analysis will be carried out regarding aggressive tax planning structures, hybrid structures (with different tax treatment in Spain and a third country), artificial generation of financial expenses, abusive use of intragroup transfer price policies, profit allocation to permanent establishments in Spain of non-resident entities and taxatin of operations carried out by residents in tax havens.

Additionally, special attention will be given to the controlling of entities that operate internationally in the field of the digital economy, in relation to the possible existence of actions aimed at excluding our jurisdiction from the payment of direct taxes due.  

Fraud in the digital economy In conjunction with the actions being carried out regarding the use of online information and controlling manufacturers and suppliers of online services, the Tax Agency shall strengthen collaborations with the tax authorities of other countries in order to verify profits obtained by economic agents using the internet as a means of advertising goods and services, given that the main advertising affiliators are large transnational companies whose head offices are located outside our borders. Furthermore, special attention will be paid to controlling importing operations associated to e-commerce transactions and the analysis of new payment methods being implemented on a growing scale -cryptocurrencies, payment mediation platforms, payments from mobile devices, etc. -, since these can facilitate opacity in transactions. In addition, the Inspections department will undertake immediate actions to verify the information supplied by companies within the framework of the Proposal to reinforce good corporate tax transparency practices by companies under the Good Tax Practices Code, agreed last December.

Actions will be particularly geared towards guaranteeing that strategic decisions made by multinationals do not go against the spirit and purpose of the BEPS project. In this manner, control actions can be carried out immediately after the operations are performed or the tax returns are filed. In addition to all of the above, there is a series of other controls that were traditionally considered priorities of the Tax Agency, linked to tax risks such as artificial splitting of activities and concealment of ownership under the guise of companies with no actual economic activity; external signs of wealth analysed by combined actions in the areas of Inspection and Customs Supervision; the use of fronts and shell companies, or the control of VAT scams in imports of products from Asia and the hydrocarbons sector. In the area of customs control the Agency will persist in combatting clandestine cigarrette manufacturing, the illegal shipping of tobacco leaf to end consumers and controlling deliveries of these between private parties via post or messenger services. With regard to money laundering, the Tax Agency shall promote the development of tools to facilitate investigations into large criminal organisations.  

Control of major debtors In the Tax Collection Area, in order to anticipate the reaction in the event of fraud in cases of tax collection fraud, the Tax Ageny shall continue to implement cautionary measures, assigning responsibilities and asset investigations to bring to light fake insolvencies or conducts aimed at evading tax debts by concealing wealth or even possible insolvency offences. Among other measures, priority will be given to the ongoing monitoring of debtors with large tax debts, by performing exhaustive ongoing asset investigations and systematically controlling pending tax debts with the aim of being fully disposed to collect on these. Monitoring will also be done on apparent insolvencies, promoting criminal proceedings where applicable and proceeding to review the status of debtors previously deemed as defaulters, checking if their asset situation allows them to settle the amounts previously uncollected due to insolvency. Similarly, control actions regarding bankruptcy cases will also be intensified, to prevent fraudulent conduct aimed at evading taxes, and actions will be reinforced to collect debts linked to offences against the Public Revenue and smuggling. Similarly, ongoing controls will be implemented to continue to deplete outstanding taxes, particularly debts under seizure.

Josep Navarro's picture
Josep Navarro es Licenciado en Económicas por la UB, especializado en Inspecciones Tributarias, con más de 25 años de experiencia en asesoría fiscal para empresas y particulares en España.