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Publication of the Code of Good Tax Practices


In 2009, the State Tax Agency established the Large Business Forum, which was made up of 27 companies belonging to the largest Spanish taxpayers. Purpose of the Forum was to discuss and implement a special relationship framework between the tax authorities and companies. Taxand Spain looks at what the code of Good Tax Practices entails.

Last July 20, the Plenary Session of that Forum approved the wording of the Code of Good Tax Practices as an instrument to - due to being voluntarily accepted by companies - implement the tax system more efficiently and with greater legal certainty.

One of the Code's major aims is to promote practices that lead to the prevention and reduction of tax risks. Furthermore, it shall encourage/force companies to avoid the use of opaque structures for tax purposes and cooperate with the Tax Agency in detecting fraudulent practices.

Perhaps most importantly for this type of taxpayer, the Code establishes certain rules for the entity's managing body which stem from the implicit objective of the Agency, which is to give greater importance and responsibility to boards of directors in the monitoring of companies' tax matters.

These rules are as follows:

  • the managing body must be informed of the tax policies applied by the company
  • before preparing the financial statements and filing the corporate income tax return, the manager in charge of tax matters at the company must inform the managing body of the policies implemented during the year
  • in case transactions or matters should be submitted to the board of directors for approval, the board must be informed of the related tax consequences, if these are an important factor.

Moreover, the Code establishes conduct guidelines for the Tax Agency, of which we can highlight the following:

  • Procedures may be established to enable taxpayers to ascertain, as rapidly as the case may require, the treatment of transactions or operations by the tax authority.
  • The Tax Agency is given the opportunity to publicise the methods it uses in its inspection procedures where they are capable of being applied generally.
  • The Agency will sincerely endeavour to consider administrative precedents and to apply the principle of uniformity in its used methods.
  • The tax authorities will consider the enclosing of explanatory exhibits or reports with tax returns as positive when determining liability for potential infringements.

Taxand's Take

The initiative is Spain's first step towards an international trend that may become unstoppable. Companies must therefore consider, as the case may be in the very short or middle term, their position vis-?-vis this text, which affects their principles of conduct and internal protocols. This issue is also relevant for subsidiaries of foreign groups that are listed or that have made a commitment to international best practice in the area of good corporate governance, which might not have the option of signing up to this code.

Nonetheless, the Code and signing up to it open up new and interesting roads of communication and certainty for many taxpayers, although the provisions and conduct guidelines for the Tax Agency, in some cases, raise questions about the possible evolution of the Code.

Your Taxand contacts for further queries are:
?ngel Calleja
T. +34 91 514 5200

Jos? Vicente Iglesias
T. +34 91 514 5200

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