Code of Best Tax Practices
Drawn up and approved by the Large Enterprises Forum to foster a mutually co-operative relationship between the Tax Agency and the companies subscribing it.
Code of Best Tax Practices
Companies play a very important role in society, not only as generators of employment and wealth, but as agents fostering development in the communities where they are located.Companies are aware of this and for years have been seeking to strengthen their social responsibility, which implies following a series of conducts that go beyond respect and strict compliance with laws and regulations, to adopt positions of active and voluntary contribution to social, economic and environmental improvement.
The existence of an adequate taxation system is an outstanding element in a country's institutional framework, which justifies that citizens, social agents and authorities become involved in actively developing and effectively applying it.
Along these lines, this Code of Good Tax Practices contains recommendations, voluntarily assumed by the Tax Administration and companies, aimed at improving the application of our tax system by increasing legal certainty, reciprocal cooperation based on good faith and legitimate trust between the Tax Agency and the companies themselves, and the application of responsible tax policies in companies with the knowledge of the Board of Directors.These recommendations are formulated in a non-exhaustive and flexible manner, allowing companies to adapt them to their own characteristics.
Correct tax management by companies and greater legal certainty in tax matters, leads to sounder financial results, reducing risks, including reputational risk.
The principles of good faith and well-placed trust that legally govern the running of the Public Administration bodies are particularly relevant in today's tax system.Not only because of more demanding regulations, but also because economic systems require companies, especially those with an international component, to make their operations more complex.In this scenario, appropriate management of the risks inherent in companies' fulfilment of their obligations to pay taxes demands greater two-way co-operation with the Tax Administration.
Even more so, when one of the main lines of action in keeping with its governing regulations undertaken by the Tax Agency is to provide the taxpayer with information and assistance.Beyond the fact that the Tax Agency guarantees the full exercise of taxpayers' rights in the course of its activity, a modern Tax Administration requires greater proximity to companies, both as the main taxpayers and as valuable tax collaborators.This proximity must be characterised not only by a better and more detailed knowledge of the taxpayer's actions, but also by ensuring the maximum publicity and durability of its interpretative criteria and actions.In short, it is this commitment from the Tax Administration which should award contributors the necessary legal certainty and enable them to better and more effectively comply with their obligations to pay taxes.In view of this, therefore, tax management should not be considered a procedure performed between two opposing parties, but as collaboration for a shared purpose.
Within this framework, the objective of the Code is to promote a reciprocally cooperative relationship between the State Tax Administration Agency (hereinafter, the Tax Agency) and the companies that subscribe to it, a relationship based on the principles of transparency and mutual trust, which should therefore lead to its development in accordance with the principles of good faith and loyalty between the parties, all of which will increase the effectiveness of the Tax Administration's controls and reduce the legal uncertainty to which companies could be exposed and the litigation that arises between them.
GOOD TAX PRACTICE
1.Transparency, good faith and cooperation with the Tax Agency in business tax practice.
All those practices which lead to a reduction in significant tax risks and the prevention of conduct liable to produce them are considered best practices which should be fostered.
Companies will avoid the use structures of an opaque nature for taxation purposes, understanding the latter to be those which, by interposing instrumental companies through tax havens or states which do not co-operate with tax authorities, are designed to impede the tax Agency from learning which company is ultimately responsible for activities or the holder of the goods or the rights involved.
Companies and the Tax Agency will collaborate in the detection and search for solutions concerning fraudulent tax practices which may occur in the markets where they are present, to eradicate those already existing and to prevent them from spreading.
The board of directors or its equivalent body will be informed about the tax policies applied by the company.Before drafting the annual accounts and filing the Corporate Income Tax return, the person responsible for tax affairs in the company will report to the board, directly or through the Audit Committee, on the policies followed during the year.
The above notwithstanding, in the event of operations or matters which need to be submitted to the board of directors or its equivalent body, a report will be submitted on the tax outcomes of these when they represent a relevant factor.
2.Transparency and legal certainty in the application and interpretation of tax rules by the Tax Agency.
The Tax Agency shall ensure that its actions take into account administrative precedents and shall ensure that the interpretation of the rules respects the unity of criteria of the Tax Administration.
To this end, the Tax Agency will apply the interpretative criteria arising from administrative and jurisprudential doctrine.In the absence of such a doctrine, when it has doubts about the criterion to be applied, it shall request a report from the Directorate General for Taxation within the scope of its competence.
The Tax Agency Department Managers will report to the Management Standing Committee on those interpretation criteria they aim to apply in their actions, whenever these refer to issues of particular significance or may cause considerable disputes with contributors and for which no criterion has been set by the Directorate General for Taxes, the Central Economic-Administrative Court or the Law Courts.
Without prejudice to the regulations applicable to the interpretation and classification of tax regulations and to the task of providing information and assistance to taxpayers, the Tax Agency shall publish the criteria it applies in its control procedures insofar as they are generally applicable.
The Tax Agency will set up adequate procedures to enable those taxpayers who have doubts as to how certain operations or operating procedures they know of are treated for taxation purposes, the criteria the Administration would apply in such operations or operating procedures as swiftly as the case requires.
Taxpayers may file an explanatory appendix together with their tax returns, declaring the criteria they have followed in filing these together with the facts on which they are based, which, if the facts are true and the criteria are reasonably founded, the Tax Agency will take favourably into account for the purposes of deciding on due diligence, fraud or guilt as regards the Spanish General Tax Act.
The Tax Agency, in its activity of applying the tax system, guarantees the full exercise of taxpayers' rights.
3.Litigation reduction and conflict avoidance.
The Tax Agency and companies aim to maintain relations that are constructive, transparent and based on mutual trust.To achieve this, both parties must endeavour to reduce conflicts resulting from interpretation of the applicable regulations, fostering use of the instruments provided for this purpose in the Tax Legal System.
The Tax Agency and companies will use all the possibilities offered by the adversarial nature of the audit procedure, promoting agreement in all the procedural phases where this is feasible and assuming the following practices:
The Tax Agency will inform the taxpayer as early as possible of the facts requiring regularisation, whereby during the audits there is the maximum possible exchange of opinion to thus enable company practices to be corrected for the future as quickly as possible.
The Tax Agency will inform the taxpayer, in the hearing process prior to the inspection reports, of the facts that influence the possible proposal for adjustment.Likewise, at the request of the latter, the essential items to be regularised shall be indicated and an attempt shall be made to provide, as a guide, a provisional quantification of the settlement that would result in accordance with the data available at that time.
The Tax Agency will include an appraisal of the taxpayer's declarations in the explanations of the decisions on which it bases its regularisation proposal.
In order to facilitate the proper assessment of the allegations submitted, undertakings shall endeavour to inform the body dealing with the procedure as soon as they are submitted, indicating the place of submission and endeavouring to provide a copy of the allegations, preferably by electronic means.
Likewise, companies will endeavour to inform of requests for extensions to deadlines for filing declarations as soon as these are submitted, indicating where they are submitted.
In Group audits, the Tax Agency will attend the declarations which may be made against inquiries against subsidiary companies, prior to the consolidated decision report.
The Tax Agency will ensure that all the relevant factual issues for the settlement and the related evidentiary activity are adequately known and discussed during the inspection proceedings prior to the signing of the tax assessment or, where appropriate, in the complementary proceedings agreed for this purpose.
The Tax Agency and companies will strive to reach agreements and approval of audits undertaken.
Likewise, care shall be taken to ensure that all relevant factual issues, if any, for the purposes of conducting the disciplinary proceedings are known and adequately discussed prior to the resolution of the proceedings.
In order to reduce the indirect tax burden for taxpayers in complying with certain obligations and in certain procedures, the Tax Agency will try to delimit as much as possible the object of the requirements and informative 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 shall endeavour to 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, as quickly and completely as possible.
ADHERENCE TO AND MONITORING OF THE IMPLEMENTATION OF THE CODE OF GOOD TAX PRACTICES
1.Subjective scope of application.
This Code has been drawn up and approved by the Large Enterprises Forum to foster a mutually co-operative relationship between the Tax Agency and the companies subscribing it.
The Code will be applied by the Tax Agency and by all the companies subscribing it, the parties being committed to its application and implementation within their respective scopes of authority.However, the Tax Agency will gradually develop paragraph 2.3.of it, taking into account the number of member companies.
The decision to subscribe to the Code of Best Tax Practices has to be formalised through an agreement from the board of directors or its equivalent body in the company, notification of which will be sent to the Tax Agency.It will notify its withdrawal from the Code in the same way.
Subscription and withdrawal will be for the Code in its entirety. It is not possible to partially subscribe to or withdraw from specific sections of it.
The Tax Agency may inform of which entities have subscribed to the Code, unless the company in question declares otherwise, through the Forum Technical Secretariat.
The annual corporate governance report of the companies subscribing to the Code should reflect that they are effectively complying with its contents.In the event of this topic not being included in the report, it will be understood that the entity has decided to renounce the Code, unless sufficient justification is given.
The Plenary Session of the Large Enterprises Forum will decide on the creation of a Monitoring Committee for the application of the Code of Best Tax Practices, which will comprise six members appointed annually, half of whom will be named by the Tax Agency and the other half by the companies belonging to the Forum.The Chairman will be one of the members appointed by the Tax Agency and the Secretary from among those appointed by the companies.
The agreements reached by the Monitoring Committee will be by consensus among all its members.
The Large Enterprises Forum is the framework within which the Tax Agency and Large Enterprises should study and agree the inclusion of new questions into the Code and the interpretation of the recommendations it makes.One of the primordial purposes of the Monitoring Committee is to submit for its consideration both the interpretation issues it considers necessary and the opportunity of broaching new issues, notwithstanding other initiatives that may help to materialise and put the Code into practice.
The Monitoring Committee will convene on a general basis once every six months, however it may meet as often as is considered necessary by the Tax Agency or companies representatives.
The Monitoring Committee will act on the principles of transparency, mutual trust, good faith and loyalty which govern the Code of Best Tax Practices.
All the data, reports or past records of any kind submitted to the Monitoring Committee or obtained by it in the performance of its duties are to be considered confidential, its members being held to the strictest and fullest confidentiality regarding them.
The Monitoring Committee will not know the particular conditions of the companies subscribing to the Code, thus its cannot become involved in any ongoing tax proceedings.