Tax penalties for the lack of withholding according to the new spanish supreme court jurisprudence on withholding

Abstract

Spanish Supreme Court of Justice has determined that the Spanish tax administration incurred in an unfair enrichment when it requires for the withholding tax to a withholder provided that the recipient of the income (final taxpayer) has filed the corresponding tax return with the tax administration (as the lack of withholding has been compensated by the final tax due paid by the taxpayer).

Although Spanish tax inspection is following the Supreme Court jurisprudence in connection with the withholding tax required to payers (to the extent that the payer has filed its tax return), penalties to withholders have been imposed in connection with the lack of withholding.

The Supreme Court jurisprudence has modified the autonomous nature of the withholding obligation in respect to final tax obligation and, in our opinion, this modification should imply, firstly, a new interpretation of the infraction applicable to the lack of withholding and, secondly, in connection with the base amount to calculate the penalty, the strict application of Article 8 of the Tax Penalty Regime Regulations which establishes that the base amount must be the tax due to pay resulting from the tax assessment carried out by the tax inspection.

A potential infringement of the mandatory regulations by the tax inspection leads to penalties which would not be proportional to the actual damage caused to the tax administration.

This article analyses the inobservance of the Supreme Court jurisprudence by the tax inspection and the contravention of the general Law principles and penalty tax law principles due to the imposition of penalties which has been imposed.