General Guidelines of the Spanish Tax Agency 2016 Tax and Customs Control Plan

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General guidelines of the Spanish Tax Agency 2016 Tax and Customs Control Plan

April 11, 2016

In brief On February 23, 2016, the Spanish Tax Agency (STA) released the general guidelines of the 2016 Tax and Customs Control Plan (the Plan). The guidelines focus on action areas pertaining to fraud control and prevention.

The Plan groups the guidelines into three main pillars: (i) verification and investigation of tax and customs fraud, (ii) fraud in tax collection, and (iii) collaboration with tax administrations.

This year the Plan has especially focused on challenging the ‘hidden economy,’ addressing risk areas identified in the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting (BEPS) Action Plan, and preventing value-added tax (VAT) fraud.

In detail These actions will complement exchange of information within Verification and the more conventional the framework of international investigation of tax and inspections carried out by the associations. customs fraud STA, with heightened attention to cash-intense businesses. It is International tax planning The fight against the hidden further expected that Pursuant to the Plan, the STA economy information exchange tools will ramp up efforts in between the Spanish tax addressing risk areas identified In 2016, the STA will continue administration and the on-site in the BEPS Action Plan, with a to maintain a coordinated tax inspectors will be more specific focus on the following: strategy to combat ‘hidden thoroughly developed. activities’ by intensifying verification and investigation Control of hidden assets and  Transactions carried out by processes to achieve early income abroad Spanish taxpayers through identification of such activities. hybrid instruments or other The STA will continue to Specifically, the STA will ‘aggressive’ tax planning implement measures to prevent increase the number of visits to instruments, to avoid or to shifting of income and hiding of the location of the taxpayer’s reduce the payment of taxes business activities. Additionally, assets abroad. These measures will take the form of non- in Spain. Special attention the STA will plan selective and will be paid when taxpayers nationwide coordinated actions transparent structures, with a take double advantage of to address fraudulent activities focus on driving coordinated related to double use software. actions that improve the

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losses or expenses, or of losses analyse online information that may Moreover, taxpayers subject to generated through intragroup assist in discovering hidden electricity and coal taxation, or transfers. activities, unreasonable profits, or otherwise operating under a specific the illicit trading of goods; (ii) license, also will be subject to  Leveraged acquisitions of shares, analyse manufacturers and service heightened control. mainly when the purpose of the providers that commercialise their transaction is to generate financial The Plan also places an increased goods or services on the internet; and expenses. focus on taxpayers subject to (iii) encourage the use of the tools environmental taxes, such as the  Transactions performed within tax that are at the disposal of the STA by ‘Green House Effect Taxes and advantageous territories. increasing information exchange Electricity Production Value Tax,’ through social network platforms. encouraging compliance with taxation  Relevant external payments or over other environmental aspects. complex transactions to which High value services anti-tax avoidance rules apply. Customs control Special attention will be paid to The STA will continue to target professional activities that constitute The European Union Regulation intra-community dividends (i.e., 952/2013, of the European Parliament ‘high value services.’ In particular, the dividends sourced in one Member and the Council, will come into force STA will enhance the evaluation of State paid to another company on May 1, 2016, with a distinct focus resident in the EU) and royalties, wealth accumulation that is not on the granting of customs as well as structures with ‘conduit consistent with historical tax returns. authorizations (and substitution or companies.’ revocation). In this sense, a number of Fight against VAT fraud controls will be intensified (i.e.,  Undetected permanent The fight against VAT-related fraud has complete control over products establishments of non-resident continuously been a priority for the STA. subject to customs, as well as controls entities, especially from The STA has announced that it will over imports). multinational groups. increasingly focus on fraudulent Prevention and suppression of  Activities performed by non- activities aimed at limiting the smuggling, drug trafficking, and residents in Spain, with a special responsibility of company owners. money laundering focus on changes of residence. Control over operations, tax and The STA’s Plan continues to reinforce  Transfer pricing in complex legal regimes, taxpayers, and other the prevention and suppression of business restructurings, services, specific activity sectors smuggling, drug trafficking, and and intangibles. money laundering, with reference to Several tax and legal regimes as well the aerial legislation amendment,  Simultaneous or multilateral as specific taxpayers will continue to which reinforces the fight against grandfathered actions in the be subject to controls. This will narco-trafficking. international cooperation include certain taxpayers, such as companies with sizable operations Fraud in tax collection framework, allowing some and companies subject to a special activities or former rights to In 2016, and pursuant to the Plan, the VAT regime, as well as certain tax continue. failure to pay taxes by way of fraud areas, such as tax credits and VAT now will be made public. Fraud Lastly, the STA has indicated that it refund requests, among others. control will be focused on specific continues to embrace Advance Pricing In terms of tax benefits, the Plan measures, such as managing Agreements (APA) to prevent fraud, continues to emphasize the need for outstanding debt of a higher number provide legal certainty, and to reduce control. For example, manufacturers of taxpayers, intensifying the litigation. who have movement of merchandise investigation activities and communications between tax Digital economy supported by electronic documentation will be subject to collection departments, improving the In terms of the digital economy, the heightened control. timing of tax debt collection and STA has prioritized the following revision of the deferment, and proposed measures to fight fraud: (i) division of payment situations.

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Collaboration between tax The takeaway documentation requirements. administrations Aggressive tax planning will be The 2016 Plan includes important especially investigated, and VAT fraud The information exchange system measures to prevent and control fraud will represent a relevant control area. between the Spanish Central in the areas of verification and Administration and the Regional investigation of tax and customs In this context, multinational Administration will continue to be fraud, fraud in tax collection, and companies that operate in Spain encouraged, especially through the collaboration with tax should analyze and evaluate the ‘Shared Only Census,’ which contains administrations. possible contingencies that may arise relevant information about all from their current operational model. taxpayers. It must be noted that a large number In addition, appropriate measures of the BEPS Actions already have been should be carried out with a view implemented in the Spanish toward mitigating those risks. regulations, including transfer pricing

Let’s talk

For a deeper discussion of how this issue might affect your business, please contact:

Tax Controversy and Transfer Pricing Services

Antonio Puentes Moreno Javier González Carcedo Alberto Monreal Lasheras +34 915 684 541 +34 915 684 542 +34 915 685 570 [email protected] [email protected] [email protected]

Tax Controversy and Dispute Resolution Global Leader David Swenson, Washington D.C. +1 202 414 4650 [email protected]

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