Tax disputes and litigation

In recent years, Spanish tax authorities have focused their attention on several issues, including business restructuring, non-resident entities obtaining Spanish-sourced income, foreign-related company acquisition, and share buy-backs involving a capital reduction.

Any tax dispute in Spain is usually initiated by an appeal against an assessment from the authorities. If an initial appeal to the authority is rejected or is not filed, an appeal can be lodged with the tax tribunal but their decisions tend be in line with those made by the tax authorities. Tribunal appeals must be lodged within one month of the assessment notification.

If the tribunal appeal is also rejected, then a further appeal can be made to the courts within a two-month time limit. Courts can also adjudicate on contentious local tax cases. Generally, any disputed tax must be made following the initial assessment which will then be reimbursed subsequent to a successful appeal.

As regards the burden of proof in civil tax litigation, the tax authorities must prove the income side and the taxpayer must prove the cost side.  The court will make its decision and state its reasoning based on the evidence provided by both sides, including expert evidence, and legal arguments and facts underlying the case. Witnesses can be prepared but this is not a common practice in civil cases.

Appeals to the tax authorities and tribunals are cost-free and there is no obligation to hire legal counsel. Legal fees are incurred for appeals to the courts and, usually, the court will order the unsuccessful party to pay all the costs.

Proposals to amend several aspects of General Tax Law in Spain have been put forward, the most significant of these being the suggestion to impose penalties when there is conflict with the applicable law (the anti-abuse rule). This may be challenged by the Constitutional Court as being inconsistent with its position in several sentences.