Code of Best Tax Practices

Code of Best Tax Practices

INTRODUCTION

Companies, Institutions and Public Entities that carry out an economic activity play a very important role in social life, not only as generators of employment and wealth, but also as instruments of the State to promote the development and well-being of citizens, constituting fundamental actors in the development of the communities in which they are inserted.

In the private business sector, both national and international, a process of progressive strengthening of corporate social responsibility began more than 12 years ago, which involves following a series of conducts that go beyond respect for strict compliance with laws and other regulations, to adopt positions of active and voluntary contribution to social, economic and environmental improvement.

It is therefore logical that the aforementioned Companies, Institutions and Public Entities also formalize patterns of corporate social responsibility in which their contribution to the improvement and fluidity of relations between administrations is reflected, as well as the collaboration between them, all in order to achieve greater and necessary transparency regarding compliance with the rules and codes of conduct in use in the sectors in which they operate.

For its part, the Tax Administration has also been working intensively for years on creating a set of close relationships with taxpayers that allow for better and more transparent compliance with tax regulations, taxpayers including Companies, Institutions and Public Entities.

This type of cooperative relationship is already a standard in the relationship between the tax authorities and companies, institutions and public entities, and is gradually being extended to other groups (advisors, tax intermediaries, self-employed workers and SMEs).

It is in this context that the Forum of Companies, Institutions and Public Entities has been established as a meeting place between the Tax Administration and the Public Entities and Institutions that join it, to achieve a common space for the resolution of controversies, mutual understanding and, ultimately, to facilitate the proper fulfillment of the obligations of both parties in the tax relationship.

It is now clear that the existence of an adequate tax and customs system is an important element of a country's institutional framework, justifying the active involvement of citizens, social agents and authorities for its better development and effective application.

In this regard, this Code of Good Tax Practices contains recommendations, voluntarily assumed by the Tax Administration and the entities adhering to it, aimed at improving the application of our tax and customs system through increased legal certainty, reciprocal cooperation based on good faith and legitimate trust between the Tax Agency and the entities themselves, and the application of responsible tax policies. These recommendations are formulated on a non-exhaustive and flexible basis, allowing the Companies, Institutions and Public Entities that adopt them to adapt them to their own characteristics.

The primary objectives of this Code are to achieve proper tax and customs management by companies, institutions and public entities, as well as to achieve the highest standards of legal security in tax matters, which will undoubtedly lead to greater strength in the results of the economic management of the adhering entities, also reducing their risks, including reputational risks.

The principles of good faith and legitimate trust that govern the operation of public administrations are particularly relevant in the current tax system, not only because of the greater demands of its regulations, but also because the economic activity of the public sector has reached very high levels of complexity, especially in those sectors with an international component. In this scenario, the proper management of the risks inherent to compliance with tax obligations demands greater cooperation between the Tax Administration and Companies, Institutions and Public Entities with significant economic activity. 

One of the two main lines of action of the Tax Agency in accordance with the regulations that govern it consists of providing information and assistance services to taxpayers. Beyond the fact that the Tax Agency guarantees the full exercise of taxpayers' rights in the development of its activity, a modern Tax Administration requires greater proximity to Companies, Institutions and Public Entities, both as main taxpayers and for their valuable role as tax collaborators. This proximity must be characterized, in addition to a better and more detailed knowledge of the taxpayer's actions, by greater publicity and durability of its interpretative and action criteria.

In short, under this commitment by the Tax Administration, taxpayers will be provided with the necessary legal security in order to achieve better and more effective compliance with tax obligations, with tax management no longer being understood as a procedure between opposing parties, but as a collaboration aimed at achieving a common goal.

Having formulated a Code of Good Tax Practices between the Tax Administration and large companies in the private sector, it is clearly essential to explicitly express the aforementioned principles and guidelines for action regarding the relations between the Tax Administration and Companies, Institutions and Public Entities, which are already taking place through the natural channels of understanding between agents of the administration.

Within this framework, the objective of the Code is to promote a mutually cooperative relationship between the State Tax Administration Agency (hereinafter, the Tax Agency) and the public entities/institutions that subscribe to it, a relationship based on the principles of transparency and mutual trust, which must therefore give rise to a development of the same in accordance with the principles of good faith and loyalty between the parties, increasing the effectiveness of the controls of the Tax Administration and reducing the legal uncertainty to which Companies, Institutions and Public Entities could be exposed, as well as the litigation that could arise.

GOOD TAX PRACTICES

1. TRANSPARENCY, GOOD FAITH AND COOPERATION WITH THE TAX AGENCY IN BUSINESS TAX PRACTICE.

1. These are good practices that should be promoted by participating companies, institutions and public entities, all those that lead to the reduction of significant fiscal risks and the prevention of those behaviors that may generate them.
2. Companies, Institutions and Public Entities shall avoid the use of opaque structures for tax purposes, meaning those which, through the interposition of shell companies in tax havens or territories that do not cooperate with the tax authorities, are designed with the purpose of preventing the Tax Agency from knowing who is ultimately responsible for the activities, or the ultimate owner of the assets or rights involved.
3. Companies, Institutions and Public Entities and the Tax Agency will collaborate in the detection and search for solutions regarding those fraudulent tax practices that may be developed in the markets in which they are present in order to eradicate those that already exist, as well as to prevent their spread.
4. The Board of Directors or equivalent body will be informed of the fiscal policies applied by the entity. Before preparing the annual accounts and filing the corporate tax return, the person responsible for tax matters shall inform the Board or equivalent body, directly or through the Audit Committee, if it exists, of the policies followed during the financial year.
   Notwithstanding the foregoing, in the case of operations or matters that must be submitted for approval by the Board of Directors or equivalent body, information will be provided on the tax consequences thereof when they constitute a relevant factor.

2. LEGAL SECURITY IN THE APPLICATION AND INTERPRETATION OF TAX RULES BY THE TAX AGENCY.

1. The Tax Agency will ensure that its actions take into account administrative precedents and will ensure that the unity of criteria of the Tax Administration is respected in the interpretation of the regulations.
   To this end, the Tax Agency will apply the interpretative criteria arising from administrative and jurisprudential doctrine . In the absence of such doctrine, if there are doubts about the criteria to be applied, a report will be requested from the General Directorate of Taxes within the scope of its competence.
   The Department Directors of the Tax Agency shall inform the Permanent Steering Committee of the Agency of the interpretative criteria that they intend to apply in their actions, provided that they refer to issues of special importance for which there is no established criterion by the General Directorate of Taxes, the Central Economic-Administrative Court, or the Courts of Justice.
2. Without prejudice to the applicable regulations regarding the interpretation and qualification of tax rules and the work of information and assistance to taxpayers, the Tax Agency will make public the criteria followed in its control procedures as long as they are susceptible to being applied generally.
3. The Tax Agency will establish appropriate procedures to allow companies, institutions and public entities that have doubts about the tax treatment of certain operations or transactions to know, as quickly as required by the case, the criteria that the Administration would apply in such operations or transactions.
4. The adhering entities may submit an explanatory annex along with the tax returns, stating both the criteria followed in preparing them and the facts on which they are based, which will be evaluated favorably by the Tax Agency in order to determine the diligence, fraud or fault referred to in the General Tax Law (as long as the facts correspond to reality and the criteria are reasonably founded).

3. REDUCING LITIGATION AND AVOIDING CONFLICTS.

1. The Tax Agency and Companies, Institutions and Public Entities aim to ensure that their relations are constructive, transparent and based on mutual trust. To achieve this, both parties must try to reduce conflicts arising from the interpretation of the applicable regulations, promoting the use of the instruments established for this purpose by the tax legal system.
2. The Tax Agency and the Companies, Institutions and Public Entities will exhaust all the possibilities offered by the contradictory nature of the inspection procedure, promoting agreement in all procedural phases in which this is feasible and assuming the following practices:
   1. The Tax Agency will facilitate knowledge of the facts that can be regularised as soon as possible, so that, during the course of the inspection actions, a greater exchange of opinions is encouraged, which will enable the correction of actions in the future.
   2. The Tax Agency will communicate, during the hearing process prior to the initiation of inspection reports, the facts that influence the eventual regularization proposal. The essential concepts to be regularised will also be indicated, and to the extent possible, as a guide, a provisional quantification of the liquidation that would result in accordance with the data available at that time.
   3. The Tax Agency will include in the motivation of the acts on which the regularization proposal is based, an express assessment of the taxpayer's allegations.
      In order to facilitate the proper assessment of the allegations presented, Companies, Institutions and Public Entities will inform the body processing the procedure as soon as they submit them, indicating the place of submission and providing a copy of them, by electronic means in all cases.
   4. The Tax Agency will effectively address, in group inspections, any objections that may be raised against the proceedings carried out on the controlled entities prior to the consolidated report.
   5. The Tax Agency will ensure that all factual issues relevant to the liquidation, as well as the corresponding evidentiary activity, are known and discussed appropriately during the inspection procedures prior to the signing of the report or, where appropriate, in the complementary procedures agreed to for this purpose.
   6. The Tax Agency and Companies, Institutions and Public Entities will promote agreements and conformities in the inspection procedure.
   7. Likewise, efforts will be made to ensure that all factual issues relevant to the initiation of the sanctioning procedure, if applicable, are known and adequately discussed prior to its resolution.
3. In order to reduce the indirect tax burden that represents the fulfillment of certain obligations and the attention to certain procedures, the Tax Agency will delimit as precisely as possible the object of the information requests and declarations and will try to limit the duration of the verification and investigation procedures to the time strictly necessary to be able to carry out an adequate control action. For their part, Companies, Institutions and Public Entities will provide the information and documentation requested by the Tax Agency, as well as any other information that may be relevant for the development of the corresponding procedures, in the quickest, most complete and most efficient manner.

ANNEX
ADHERENCE TO THE CODE OF GOOD TAX PRACTICES AND MONITORING OF ITS APPLICATION

1. SUBJECTIVE SCOPE OF APPLICATION.

This Code has been prepared and approved by the Forum of Companies, Institutions and Public Entities to promote a mutually cooperative relationship between the Tax Agency and those that subscribe to it.

The Code will be applied by the Tax Agency and by all Companies, Institutions and Public Entities that adhere to it, with the affected parties committing to its development and implementation in their respective areas of competence. However, the Tax Agency will gradually develop section 2.3. of the same, taking into account the number of Companies, Institutions and Public Entities adhering.

2. ADHESION PROCEDURE.

The decision to adhere to the Code of Good Tax Practices must be formalized through an agreement of the Board of Directors or equivalent body of the entity, which will be communicated to the Tax Agency. Likewise, you may notify us at any time that you are unsubscribing from the service.

Adherence and withdrawal must be to the entire Code; partial adherence or withdrawal to specific sections of the Code is not admissible.

Therefore, once the Board of Directors or equivalent body of the entity has agreed to adhere to the Code of Good Tax Practices, the entity must communicate this agreement to the Tax Agency through the following procedure:

• Forwarding to the Technical Secretariat of the Forum of Companies, Institutions and Public Entities - Planning and Institutional Relations Service the agreement document for the accession of the Board of Directors or equivalent body, either through the registration of the Special Delegation of the company's affiliation or the Central Delegation of Large Taxpayers, or by sending an email to the following address: stecnica.foroentidadespublicas@correo.aeat.es
• The Technical Secretariat of the Forum of Companies, Institutions and Public Entities will then inform the Special Delegation to which the company is assigned or, where appropriate, the Central Delegation of Large Taxpayers of the entity's adherence to the Code of Good Tax Practices.
• Finally, once the express consent of the entity has been obtained, the Tax Agency will publish the list of Companies, Institutions and Public Entities adhering to the Code of Good Tax Practices on its website, in the section created for this purpose.

The Tax Agency may inform which entities have adhered to the Code with their prior express consent, through the Technical Secretariat of the Forum.

The annual corporate governance report or similar document (management report, annual report, etc.) of the Companies, Institutions and Public Entities adhering to the Code must reflect the effective compliance by those with its content. In the event that this issue is not reflected in the report, it will be understood, unless there is sufficient justification, that the entity has decided to waive it.

3. MONITORING COMMITTEE.

The Forum of Companies, Institutions and Public Entities is the venue where the Tax Agency and Companies, Institutions and Public Entities must study and agree on the inclusion of new matters in the Code and the interpretation of its recommendations.

The Plenary Session of the Forum of Companies, Institutions and Public Entities will determine the creation of a Monitoring Committee for the application of the Code of Good Tax Practices, composed of six members, appointed annually in equal parts by the Tax Agency and the Companies, Institutions and Public Entities participating in the Forum. The position of President will be held by one of the members appointed by the Tax Agency and that of Secretary will be held by a member from among those appointed by the Companies, Institutions and Public Entities.

One of the primary objectives of the Monitoring Committee is to present to the Committee the questions of interpretation that it considers appropriate, as well as the opportunity to address new matters, without prejudice to any other initiatives that may assist in the materialization and implementation of the Code.

The actions of the Monitoring Committee will be guided by the principles of transparency, mutual trust, good faith and loyalty that govern the Code of Good Tax Practices.

The decisions of the Monitoring Committee shall be adopted by consensus among its members.

All data, reports or background information of any kind submitted to the Monitoring Committee or obtained by it in the performance of its duties shall be confidential, and its members shall be bound to the strictest and most complete confidentiality regarding them.

The Monitoring Committee will not be able to take cognizance of specific situations of Companies, Institutions and Public Entities adhering to the Code, and therefore will not be able to intervene in any ongoing tax procedure.

The Monitoring Committee will meet as many times as deemed necessary by the representatives of the Tax Agency or of Companies, Institutions and Public Entities.