…fight against submerged economy and the investigation of overseas assets and income.
The resolution of February 22, 2016 of the General Directorate of the Spanish Tax Agency has passed the general guidelines of the Annual Tax Control Plan for fiscal year 2016.
The Tax Control Plan intensifies the fight against submerged economy and the investigation of overseas assets and income.
✔ An important focus of attention is on the investigation of overseas assets and income, using for such a purpose Form 720 (Declaration of overseas assets), the FATCA Agreement with the United States or agreements entered with third countries.
It is foreseen to review that Spanish resident taxpayers declare their worldwide income, based on the information obtained by the Spanish tax authorities from other EU countries.
✔ It is important to note, due to the severe tax penalties they are subject to, that it is foreseen to undertake tax audits related with Form 720, not only due to its non submission but also because of the existence of signs of non disclosure of assets or due to the lack of consistency between the assets included in the tax return and the tax information available to the tax authorities for the same tax payer.
✔ In relation to International tax planning, it is anticipated to control the use of the so-called hybrid instruments, the existence of permanent establishments or the appropriate use of transfer pricing policies, whose formal and material compliance we strongly recommend you.
✔ The control of the digital economy will be focused on the verification of taxation of businesses operating in internet and of the profits obtained by companies advertising products and services in internet.
✔ The Agency plans to focus its efforts in other areas such as the control of submerged economy or the increase of its debt collection capacity. For these purposes, the units of the information technology auditing teams will appear in companies with intensive cash management (for example, retailers), a strong control of the limits to make cash payments will be made and processes for assigning responsibilities will be increased.
✔ Although there is criticism in respect to the practical effectiveness of the Tax Control plan as it is not focused in prosecuting the sophisticated fraud, our understanding is that certain aspects of it (for example, relating to international tax planning) in conjunction with the effort to increase the exchange of information with other jurisdictions as we have previously informed you, can certainly improve the fight against tax fraud.