Tax Audit Defence in Spain

Tax inspections in Spain are governed by Articles 141-159 of the General Tax Law (Law 58/2003) and the RGIT (RD 1065/2007), with a maximum duration of 18 months extendable to 27 in cases of particular complexity. Euroaccounts, from Madrid and with over 500 international companies advised since 1996, defends subsidiaries of foreign groups before the Spanish Tax Agency with a proactive strategy: we prepare the documentation before the inspection arrives, not after it has started.

Direct representation before the AEAT throughout the inspection procedure
Proactive defence strategy: documentation prepared before the inspection
Specialisation in transfer pricing inspections (Article 18 LIS)
Negotiation of conformity assessments with 30% penalty reduction
Appeals to TEAR, TSJ and Supreme Court if the resolution is unfavourable
Trilingual team (ES/EN/FR) that communicates each phase to the group's parent

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Tax Audit Defence Services

Comprehensive protection from prevention through to the final court appeal

Prevention and Document Preparation

The best defence starts before the inspection. We review the subsidiary's tax position, prepare supporting documentation for the most sensitive transactions (transfer pricing, deductions, intra-Community transactions) and establish protocols so the subsidiary's team knows how to respond to AEAT requests.

Representation During the Inspection

We act as authorised representatives before the AEAT inspectors. We manage all communications, respond to information requests, control deadlines and protect taxpayer rights (Article 34 LGT). We coordinate with the group's parent to keep them informed at every stage.

Assessment Negotiation

When the inspection proposes adjustments, we analyse the legal basis and quantify the impact. We negotiate with inspectors to minimise contingencies. Where the proposed adjustment is reasonable, we recommend signing conformity assessments entailing a 30% penalty reduction (Article 188.1.a LGT).

Appeals and Tax Litigation

If the resolution is unfavourable, we file appropriate appeals: reposicion appeal (1 month), TEAR claim (1-2 years to resolution), contencioso-administrativo appeal before the TSJ (2-3 years) and, where relevant, cassation appeal before the Supreme Court. We evaluate success probabilities at each level to recommend the optimal strategy.

How We Manage a Tax Inspection

A structured process protecting the subsidiary's interests at every stage

1

Upon receiving the inspection notice, we analyse the scope (taxes and years affected), evaluate the tax positions adopted, identify risk areas and define the defence strategy. We prepare a report for the parent with the base-case scenario, worst-case scenario and action recommendations.

2

We represent the subsidiary in all appearances before the AEAT inspectors. We respond to documentation requests controlling what is provided and when. We file objections to extended proceedings. We strictly monitor procedure deadlines, as the Authority's non-compliance can lead to statute-barring.

3

When the inspection concludes, the inspectors issue a proposed adjustment. We analyse each proposed item, its legal basis and quantification. Together with the subsidiary and parent, we decide whether to sign conformity assessments (accept with 30% penalty reduction) or non-conformity assessments (reject and appeal).

4

For non-conformity assessments, we submit written objections to the Chief Inspector. If the assessment confirms the adjustment, we evaluate with the subsidiary the advisability of appealing to the TEAR or filing a reposicion appeal.

5

If the administrative route does not resolve favourably, we file a contencioso-administrativo appeal before the competent TSJ (High Court of Justice). In cases of cassation interest (novel issues or divergent tribunal criteria), we appeal to the Supreme Court. We inform the parent of success probabilities and estimated costs at each level.

INSPECTION PROCEDURE

The Tax Inspection Procedure in Spain — What You Need to Know

The tax inspection procedure in Spain is governed by Articles 141-159 of the General Tax Law (Law 58/2003) and developed by the RGIT (RD 1065/2007). It is a formal procedure with strict deadlines and taxpayer guarantees that must be understood and exercised.

Duration: The maximum is 18 months from notification of commencement (Article 150.1 LGT). This extends to 27 months when: the taxpayer’s turnover exceeds EUR 5.7 million in any of the investigated years, the taxpayer is part of a tax consolidation group, or the taxpayer carries out activities within a group defined in Article 18.2 LIS (transfer pricing documentation obligation). If the Authority exceeds the maximum deadline, the proceedings do not interrupt the statute of limitations, meaning older fiscal years may become statute-barred.

Taxpayer rights during the inspection (Article 34 LGT): Right to be informed of the scope; right to obtain copies of assessments and proceedings; right to submit objections at any time; right to proceedings within legal deadlines; right not to provide documents already submitted to the Authority; right to respectful treatment and confidentiality of tax information.

Professional representation is critical for controlling the flow of information to the inspectors and ensuring taxpayer rights are actively exercised.

Maximum duration 18 months (27 for companies >EUR 5.7M or groups with TP)
Authority exceeding deadlines can result in statute-barring
The taxpayer has formal rights that must be actively exercised
Professional representation is key to controlling information flow

TRANSFER PRICING

Transfer Pricing Inspections — The Greatest Risk for International Subsidiaries

Transfer pricing inspections are the principal tax risk for subsidiaries of foreign companies in Spain. Article 18 of Law 27/2014 requires related-party transactions to be valued at arm’s length and documented.

Documentation obligations (Article 18.3 LIS and RD 634/2015): Master File (mandatory for groups with consolidated turnover >EUR 45 million), Local File (with the same threshold), and Country-by-Country Report (for groups >EUR 750 million consolidated turnover).

Principal inspection adjustments:

Management fees: The AEAT frequently challenges intra-group services when there is no evidence the service was effectively provided (benefit test), the amount is not arm’s length, or it constitutes shareholder activities not chargeable to subsidiaries.
Royalties: Payments for brand, technology or know-how use that do not correspond to a real economic value transferred or whose amount exceeds the arm’s length range.
Intra-group financing: Loans at non-market interest rates, or loans whose economic structure suggests they should be reclassified as capital contributions (implicit thin capitalisation).
Business restructurings: Transfers of functions, assets or risks between group entities without adequate compensation.

Euroaccounts’ strategy: We base our approach on preventive preparation: maintaining up-to-date transfer pricing documentation, annually reviewing pricing on related-party transactions, and preparing comparability analyses with recognised databases (Bureau van Dijk/Orbis, TP Catalyst). When the inspection arrives, the documentation is already prepared, significantly reducing adjustment risk and procedure duration.

Master File + Local File mandatory for groups >EUR 45M turnover
Management fees, royalties and intra-group financing: principal adjustment focus
Preventive documentation prepared by Euroaccounts before the inspection
Comparability analyses with Bureau van Dijk/Orbis databases

ASSESSMENTS AND APPEALS

Conformity Assessments, Non-Conformity Assessments and Appeals Route

Upon concluding the inspection, the inspectors formalise their conclusions in assessments (actas). The type of assessment and the decision to appeal have direct economic implications.

Types of assessments:

Conformity assessments (Article 156 LGT): The taxpayer accepts the proposed adjustment. Principal advantage: 30% penalty reduction (Article 188.1.a LGT). If the penalty is also paid voluntarily without appeal, a further 25% reduction applies. Total penalty reduction can reach up to 47.5%.
Non-conformity assessments (Article 157 LGT): The taxpayer rejects. A 15-business-day objection period opens before the Chief Inspector, who must resolve within 1 month. The assessment can then be appealed administratively and judicially.
Agreed assessments (Article 155 LGT): An intermediate formula where both parties reach agreement. Requires a guarantee (bond or deposit). Penalty reduction is 50%. Non-appealable except for consent defects.

Appeals route:

Reposicion appeal (Article 222 LGT): Optional, before the same body. 1 month deadline. Limited practical effectiveness.
TEAR claim (Article 235 LGT): Before the Regional Economic-Administrative Tribunal. 1 month filing. Resolution: 1-2 years. For amounts >EUR 150,000, direct appeal to the TEAC (Central Tribunal).
Contencioso-administrativo appeal (Law 29/1998): Before the TSJ. 2-month deadline. Resolution: 2-3 years. First true judicial instance.
Cassation appeal before the Supreme Court: For matters of cassation interest. Resolution: 2-4 years. Supreme Court judgments establish binding precedent.

The decision between conformity and non-conformity must be based on a cost-benefit analysis considering: the legal basis for the adjustment, the amount at stake, the penalty reduction for conformity (30-47.5%), litigation costs (professional fees over 3-7 years of appeals), the financial cost of deferral (late-payment interest at the legal rate + 25%), and the probability of success at each appeal level. Euroaccounts performs this analysis for each proposed adjustment and recommends the optimal strategy.

Conformity assessments: 30% penalty reduction (up to 47.5% with voluntary payment)
TEAR: resolution in 1-2 years; TSJ: 2-3 years; Supreme Court: 2-4 years
Individualised cost-benefit analysis for each inspection adjustment
Possibility of partial conformity: accepting some adjustments and appealing others

Frequently Asked Questions

Common questions about tax inspections of international companies in Spain

The maximum legal duration is 18 months from notification (Article 150.1 LGT), extendable to 27 months if turnover exceeds EUR 5.7 million or the taxpayer belongs to a group with transfer pricing documentation obligations. If the AEAT exceeds the maximum, the proceedings do not interrupt the statute of limitations, potentially meaning older fiscal years become statute-barred and the Authority loses the ability to make adjustments.

A conformity assessment means the taxpayer accepts the inspection’s proposed adjustment. The main advantage is a 30% penalty reduction (Article 188.1.a LGT), which can reach 47.5% if paid voluntarily. It is worthwhile when the adjustment’s legal basis is solid and appeal success probability is low. Euroaccounts analyses each adjustment individually and may recommend conformity on some and non-conformity on others.

Subsidiaries belonging to groups with consolidated turnover exceeding EUR 45 million must prepare and maintain the Master File (group documentation) and Local File (entity documentation), per Article 18.3 LIS and RD 634/2015. For groups with consolidated turnover exceeding EUR 750 million, the Country-by-Country Report is also mandatory. Lacking this documentation constitutes a tax infringement and weakens the subsidiary’s position in a transfer pricing inspection.

Yes, this is one of the principal inspection focuses for subsidiaries of foreign companies. The AEAT reviews that related-party transactions (management fees, royalties, intra-group financing, sales/purchases) are valued at market prices. Inspectors use comparable databases (Bureau van Dijk/Orbis) and OECD Guidelines to challenge applied pricing. Euroaccounts prepares transfer pricing documentation preventively so the subsidiary is ready before the inspection.

Actual resolution timeframes are: reposicion appeal 1-2 months, TEAR claim 1-2 years, contencioso-administrativo appeal at the TSJ 2-3 years, and Supreme Court cassation appeal 2-4 years. In total, exhausting all levels can take between 5 and 9 years. During this time, if suspension with guarantee is not requested, the tax debt is enforceable. Late-payment interest accrues at the legal money rate plus 25%.

Article 34 of the LGT sets out taxpayer rights: to be informed of the scope of proceedings, to obtain copies of assessments and proceedings, to submit objections at any time, for proceedings to be completed within deadline, not to provide documents already submitted to the Authority, respectful treatment, and confidentiality of tax information. These rights must be actively exercised — Euroaccounts ensures the AEAT respects them at every stage.

Tax penalties are governed by Articles 183-212 of the LGT. For failure-to-pay infringements: 50% (minor), 50-100% (serious) or 100-150% (very serious) of the unpaid amount, depending on concealment, fraudulent means and the amount. Conformity assessments reduce the penalty by 30%, and voluntary payment without appeal adds a further 25%. Penalties for formal non-compliance (not filing returns, not maintaining accounts) carry fixed fines.

Euroaccounts prepares an initial report for the parent covering: inspection scope (taxes and years), risk analysis with base-case and worst-case quantified scenarios, proposed defence strategy, and estimated timeline. During the procedure, we send periodic updates in the parent’s language (English, French or Spanish). At conclusion, we present a resolution report with the actual economic impact and lessons learned to prevent future contingencies.

Insights

International Specialist Team

Our tax defence team includes professionals with direct experience at the Tax Agency and leading tax advisory firms. They understand the inspection procedure from both sides, enabling them to anticipate the inspectors' lines of inquiry and build more effective defences. Specific expertise in transfer pricing inspections of international group subsidiaries. Trilingual team (Spanish, English, French) led by David Bua from Madrid.

Meet the team

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Have You Received an AEAT Inspection Notice?

Do not wait. Contact our team within the first 48 hours to define the defence strategy. If you have not yet been inspected, even better: we prepare the preventive documentation so your subsidiary is protected when it arrives. Over 500 international companies trust Euroaccounts since 1996.

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Trilingual team: ES · EN · FR
+500 companies advised since 1996
Member of INPACT Global — 60+ countries

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91 991 84 80 · info@euroaccounts.eu

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