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Spain Normalizes Tax Compliance with UNE 19602

2019-03-06T20:05:59+00:0006/03/2019|Tax|

On 28 February, Spain´s Asociación Española de Normalización, or UNE, published its anticipated standard on tax compliance, UNE 19602. This standard is the result of various stakeholders´ work – almost all of us in the tax field – over several years, including groups of business associations, services firms, professional associations and alike.

It is important to emphasize that although it has not had direct participation or contributions from the Tax Agency (AEAT), the entity has broadly approved the initiative because it satisfies the guidelines of interaction between the Administration and taxpayers under the internationally recognized “cooperative relationship.”

However, this cooperative  relationship today is, at least in Spain, little more than a desire, with hardly any real content at present. Suffice to see the extremely high rates of tax litigation , including administrative bottlenecks inthe economic-administrative courts and jurisdictional contension.  Nonetheless, UNE 19602 moves in the desirable direction of greater collaboration in advnace.

Without prejudice to the deliberative analysis that this extensive and detailed “Manual of Procedures on Tax Compliance” requires, those of us who dedicate ourselves to this task, both in professional firms and in the financial and tax management of companies and groups of companies, have outlined below some of its most relevant aspects with greatest impact in practice.

The Tax Compliance Guide

First of all, it is important to note that UNE 19602 is not an obligatory legislation, law or regulation. On the contrary, it is a certification that can be freely accepted and adopted by stakeholders. It is open to every Spanish company and group, regardless of their size.

At the same time, it is perfectly compatible and integrated with other existing corporate control instruments, such as UNE 19601 on penal compliance or UNE-ISO 37001on anti-bribery.

Among its advantages, adopting UNE 19602 guidelines aligns firms with corporate responsibility best practices. It will be useful to define and implement – in  a systematic and organized way – tax  control risks and obligations that the governing bodies and senior management of companies (listed or not) face. This addresses the definition of fiscal strategies and policies, levels of fiscal risk assumed by the organization, and other elements of this type.

Another noteworthy aspect of its application is its direct impact on a lower lever of the tax litigiousness – which obviously will not disappear – but which should be more predictable and perhaps involve fewer derivative procedures.

What about criminal risks? It is known that the monetary threshold that separates administrative sanction from tax offence is minimal, since the 120,000 euros of unpaid taxes from which any correction made by the Tax Office can be seen as a felony, is a negligible amount within any business organization no matter how small. Therefore, the standardized system under this UNE should be used to mitigate criminal risks, including those of tax crime, for which, remember, legal persons may be responsible.

Another striking aspect of the UNE, perhaps because it is new, is that it pays special attention to ensuring that people responsible for the tax function within companies have the appropriate professional qualification, a relevant extreme in a country like Spain in which the profession of tax advisor is not formally regulated. In addition, the remuneration of such persons may not reward or encourage aggressive actions or tasking very high tax risk positions. In this case, it is, once again, is another debatable matter. Its counterpoint is that, of tax administrations that incentivize their officers to make adjustments, according to the statistics, more than half of them are corrected downwards or directly annulled by the Courts.

In short, UNE 19602 is a very interesting certification instrument for the control and management of tax compliance in companies and groups of any size, which will be affirmed by the Tax Administration and the Courts in case of conflict. We will be paying attention to how it is put into practice.