Debt Collection: Understanding the Enforcement Procedure

Posted on Mar 7, 2025 in Law & Jurisprudence

Principal Result: Initiating the Debt Enforcement Procedure

It is possible to initiate the urgency debt procedure. This procedure is directed to collect the fine, even after summary proceedings initiated by the debtor. The debtor can pay the debt, and charges shall be payable as follows:

Article 28 of the LGT (Ley General Tributaria) establishes three types of surcharges:

  • a. Executive Surcharge (5% Interest on Arrears): Applies when the entire debt was not paid during the voluntary period. This surcharge is applied after the beginning of the “Executive period” but before receiving final orders to formally begin the “enforcement procedure.”
  • b. Reduced Pressure Surcharge (10% Interest on Late Payment): Is payable when, after notification of the Order, the whole of the claim (not entered in the voluntary period) and the 10% surcharge, are paid before the expiry of the income period for debts in the Executive period. These periods are shorter and are found in Article 62.5 of the LGT. To be entitled to the 10% reduced fee, you must pay this surcharge along with the debt.
  • c. Regular Constraint Surcharge (20% + Interest on Arrears): Applies in cases where income is received after the deadline specified in Article 62.5 of the LGT without full payment of the debt. In this case, where the administration efficiently executes the recovery, it will require the 20% surcharge + interest + costs of the procedure.

Understanding Default Interest

The period before starting the stages of the execution process is important to study the default interest.

Definition: Ancillary services, which are not conditioned by the guilt of the tax obligation and do not require prior application of the damage suffered by the Administration. It responds to not having cash amounts that are legally due for an extended time.

Basis of Calculation: Default interest is calculated on the amount not entered or on the return of improperly charged amounts.

Amount: The interest shall be equal to the legal interest rate increased by 25%, except in cases of postponement, or suspension of fractionated debts that are fully guaranteed. In the latter case, the legal interest rate will apply.

Compulsory Process: Powers of the Administration

(Article 162 of the LGT, refers to Articles 142 and 146 of the LGT)

The powers enjoyed by collecting bodies are almost the same as those of inspection bodies; that is, they are very broad. These powers include:

  • Reviewing and investigating the existence or status of the property or rights of forced taxation. Forms of exercise: access to logbooks, business premises, etc.
  • School inspectors can take any precautionary measures deemed necessary to ensure (and prevent the “disappearance” of) property or rights to cover the debt.
  • Power to require taxpayers to list property or rights to cover the debt.
  • Faculty to do everything required and not served by the tax obligation.

Commencement of Enforcement Procedure

Three conditions must be met:

  1. There must be a self-assessed or liquidated debt.
  2. The Executive period must have begun.
  3. The enforcement order must have been issued.

The process effectively begins with the notification of Providence. This notice must include:

  • Identification of the debtor and outstanding debt.
  • Executive Charges period (as described above).
  • The time, place of entry, and a warning that, if the said income is not made, assets will be seized.
  • Information on resources or claims that can be filed, the place and time they can be brought, and before which bodies.

The beginning of the executive period allows the Administration to take precautionary measures as it deems appropriate to ensure the enforcement of the debt. Once the taxpayer has knowledge of the initiation, through the notification of the enforcement order, they may object to it.

Grounds for Opposition

The LGT, in Article 167.3, states limited grounds of opposition to the ruling:

  • Material Grounds (there is no debt involved):
    • Payment or relief from debt.
    • Prescription of the debt.
    • A rescheduling or settlement of debt was granted.
    • Settlement of the debt with a credit right.
    • Any other cause that involves the suspension of the debt.
  • Formal Grounds (involving irregularities in the proceedings):
    • The tax from which the debt derives has not been notified.
    • Errors in the notification of the providence.
    • The cancellation of the liquidation of the debt derived.