Navigating tax inspections in Spain: Essential guidance for foreigners

Being informed of a tax inspection in Spain can be particularly daunting for foreigners, especially those who are self-employed. Understanding how to respond, what documents to prepare, and other essential advice can help mitigate the stress associated with this process.

Typically, a tax inspection is prompted by specific incidents or if your business falls under the scrutiny of the Spanish tax agency for fraud control. This often includes sectors where cash payments are common, rather than bank transfers. Foreigners working for companies abroad may be particularly vulnerable if they frequently receive VAT refunds.

Upon receiving a letter from Hacienda's tax inspection unit, it is crucial to read the document carefully. The letter will outline the reasons for the inspection, the years under review, the requested information, and the response deadline. Failing to respond by the specified date can lead to penalties.

The first step is to organize all relevant documentation, including invoices, receipts, tax returns, and bank statements. Ensure that all records are up to date and stored together for easy access. In Spain, it is mandatory to retain these documents for six years, as inspections can cover this timeframe.

Next, review all financial figures and calculations to confirm their accuracy. If you employ a gestor, it is advisable to consult them to verify that all submitted calculations are correct, as errors can occur. Prepare justifications for any significant business expenses or cash transactions. If you do not have a gestor or accountant, consider engaging one to help prepare for potential inquiries from the tax agency.

In some cases, inspectors may conduct on-site visits, but this is limited to public locations, such as cafés. For home-based work, an administrative or court order is required for any personal inspections.

Once everything is organized, you will typically submit your evidence digitally or via post, without needing to appear in person. However, you may be required to attend an interview or questioning session.

The Treasury will inform you of the outcome within a designated timeframe, indicating whether your records are correct, if additional information is needed, or if you owe further taxes. It is vital to respond confidently to any inquiries, demonstrating your preparedness.

Following the assessment, you will receive a settlement notification. Accepting the outcome without filing objections may lead to a reduced payment. If you believe the result is incorrect, you have the option to file an appeal, though this could incur penalties.

Once the process is complete and all dues are settled, it is essential to keep all documentation organized and readily accessible for any future correspondence with the tax agency. This includes retaining records of all communications and the final results.

If you have any uncertainties, seeking professional advice can provide clarity tailored to your specific situation.