Tax rules have developed so complex that it becomes difficult for any taxpayer to gain security that their interpretation and further application is correctly done.
Spanish tax regulations provide for a procedure that permits taxpayers obtaining a binding resolution on how tax laws are to be interpreted in the taxpayer’s particular case.
Their main advantage is that the criterion established in their resolutions binds the Spanish tax authorities, thus implying that they will not be entitled to modify the taxpayer’s tax return filed based on the criteria they establish or impose any tax penalty, for so long as the facts are the same and the rules on which the resolution is based do not change.
✔ The process is essentially written and requires the taxpayer’s identification as well as a wide explanation of the taxpayer’s facts that give rise to the taxable event on which the question is being filed.
✔ The filing has to be done prior to the finalization of the term of the tax obligation about which the question is asked. It cannot be based on taxable events that are subject to review by the Spanish tax authorities.
✔ The organism in charge of resolving is the “Dirección General de Tributos – DGT (General Directorate of Taxes) depending from the Spanish Ministry of Finance.
The resolutions are made public, on a no –name basis, so that any taxpayer can gain knowledge of the interpretation criteria they include.
It is important to note that whenever a taxpayer follows the criteria of a DGT resolution, it shall be excluded from being imposed tax penalties in a tax audit process, if the circumstances are similar to those of the resolutions and the regulations in force are the same.
✔ Although the legal term to resolve is of six months as from the filing, in practice, this term may be extended to nine – twelve months on average. Consequently, it is important to plan that the resolution is obtained prior to the end of the voluntary term to file the tax return corresponding to the facts about which the question is filed.
There is no doubt that, in our current context, this is a best practice for tax prevention. Remember that, as Benjamin Franklin said, in this world, nothing can be said to be certain except death and taxes.