The tax authorities are increasingly imposing fines, even for minor errors. However, the right to appeal is protected by law, and there are good reasons not to simply accept a fine without challenging it.
In recent years, the Tax Agency (Hacienda or AEAT) has significantly expanded the use of administrative penalties. What was once reserved for clear cases of tax fraud is now also applied to everyday situations such as a tax return that was not completed correctly, a blank field, or a figure that does not match the AEAT’s own records. In several cases, we have even seen double penalties being imposed: one for incorrectly completing the tax return and a second for the same error under a different provision of the General Tax Law.
Even more worrying is that, in some cases, taxpayers who lodge an objection to a tax assessment are penalised simply for doing so, under the pretext of ‘obstruction of the Public Authorities´. The implicit message is clear: pay up now and don’t ask any questions. In our view, this practice goes far beyond the legitimate exercise of the state’s power to impose penalties.
The power to impose sanctions is not unlimited
The state has the power to impose penalties, but that power is limited by constitutional safeguards. These protections apply in administrative proceedings just as they do in criminal law. The Spanish Constitution, the General Tax Law (Law 58/2003), and European human rights law set essential limits on how penalties may be imposed. The key safeguards are:
- Presumption of innocence (innocent until proven guilty). The burden of proof for the tax offence rests entirely with the tax authorities. A taxpayer cannot be penalised simply for submitting an incorrect form; the authorities must prove intent or gross negligence. However, the authorities often reverse the burden of proof, meaning it is up to you to prove that they are wrong.
- Proportionality. The severity of the penalty must be proportionate to the seriousness of the offence. Imposing the maximum penalty for a simple error is, in many cases, legally untenable.
- Effective legal protection. Every taxpayer has the right to challenge any administrative decision before an independent court. This is not a privilege; it is a constitutional right enshrined in Article 24 of the Spanish Constitution.
Why you don´t need be afraid to appeal against a penalty
One of the most important practical features of Spanish tax law is that penalties are automatically suspended from the moment an appeal is lodged. From the submission of an application for review or an administrative appeal until the final ruling in the proceedings, including court proceedings, where the suspension must be expressly requested, the penalty does not accrue interest. It is simply suspended.
This differs fundamentally from the provisional assessment that gave rise to the penalty. The tax assessment itself, whether it concerns personal income tax (IRPF), non-resident income tax (IRNR) or capital gains tax, does accrue interest and, in many cases, must be dealt with separately. We have explained this in detail in previous articles. However, the fine itself is suspended as soon as an appeal is lodged.
The Tax and Customs Administration’s incentive: a discount for payment without appeal
There is one drawback to appealing a penalty that should be clearly understood: you lose the right to the reduction that the Tax Authority offers for prompt payment and acceptance of the penalty. Generally, accepting a penalty without challenging it entitles you to a reduction of up to 40% (or even more in certain cases). This reduction is lost as soon as an appeal is filed.
This is precisely the mechanism from which the Tax and Customs Administration appears to benefit. By imposing penalties for minor errors whilst simultaneously offering a substantial discount upon acceptance, the government creates an economic incentive that discourages challenging the fine.
When the costs of legal representation are added to this, many taxpayers, particularly those dealing with smaller amounts, will conclude that challenging the decision is not worth the effort. We understand this reasoning but also find it legally problematic. The system should not operate as a commercial negotiation; penalties must be based on a solid legal foundation, otherwise they should not be upheld.
What should you do if you receive a notice?
If you receive a notice from the tax authorities that you consider to be incorrect, whether it concerns income tax, double taxation between countries, capital gains tax, tax for non-residents or any other tax, do not accept it automatically. Read it carefully and check the deadline for lodging an appeal. And seek legal advice before this deadline expires.
The deadlines in tax proceedings are strict and generally cannot be extended. An incorrect tax assessment or a disproportionate fine that is not challenged in time becomes final and enforceable. Once that deadline has passed, there is little that can be done.
Selena Escandell