Tax Self-Assessment: Late Filing and Legal Recourse
Is the Procedure for Collecting Debts Fair?
The deadline to file for voluntary self-assessment of income tax for 2005 ended on June 30, 2006. According to Article 161.1 b) of the General Tax Law (LGT), when a debt is settled by self-assessment, the executive period starts on July 1, 2006. From that moment, late payment interest begins to accrue, as per Article 26 of the LGT.
On September 25, 2007, a spontaneous and extemporaneous self-assessment was made. This triggers the surcharges provided for in Article 27 of the LGT. Given that more than 12 months have passed since the submission deadline, a surcharge of 20% must be applied, as stated in paragraph 2 of the same article.
Furthermore, the article continues, “In these cases, late payment interest will be required for the period from the day following the expiry of 12 months after the deadline for submission until the time when the self-assessment or declaration was filed.” Therefore, it is necessary to require late payment interest for the period running from July 1, 2007, until September 25 of that year.
Since the self-assessment was not followed by the related payment, and it is a debt settled by self-assessment, the executive period starts the next day, i.e., September 26. From this date, late payment interest accrues.
On the other hand, Article 27.2, in the case at hand (where the presentation of the self-assessment is made after 12 months from the end of the deadline), excludes the imposition of sanctions that would be provided for in section 198 of the LGT. This section refers to violations “for failing to file tax self-assessments or statements on time without causing economic loss, for breaching the obligation to communicate the tax residence, or breaching the conditions of certain permits.”
On October 15, 2007, the collection agency demanded payment of the sums due, including a penalty that should not have been imposed and a penalty for late declaration lower than the 20% that should have been applied. Therefore, the agency did not act properly.
Legal Recourse and Suspension
The taxpayer can appeal to the courts. According to Article 227.2 b) of the LGT, which refers to acts subject to economic-administrative claims, “in the field of application of charges, the following are claimable: a) provisional or final settlements…”
Regarding suspension, it is important to note that the taxpayer does not need to request it. It occurs automatically in accordance with Article 233.1, which states: “The execution of the contested act shall be suspended automatically upon application by ensuring the amount of such act, default interest generated by the suspension, and the charges that might come, in the terms established by regulation. If a challenge to a tax penalty would affect the execution of that, it will be suspended automatically without the need to provide guarantees in accordance with paragraph 3 of Article 212 of this Act.”
Bearing in mind that in this case, the dispute concerns a tax penalty, its execution shall be suspended automatically. Furthermore, under Article 233.7 of the LGT, “The suspension of operation of the act will be maintained during the processing of economic and administrative proceedings in all courts.” Therefore, until the appeal is resolved, no action can be taken.
Enforcement Order
Before issuing an enforcement order, it would be necessary to notify the taxpayer of the enforcement order. As stated in Article 161.3 of the LGT, “Once the executive period has begun, the tax authorities will proceed to collect the liquidated debts or self-assessed debts referred to in paragraph 1 of this Article by means of the enforcement procedure regarding the assets of the obligated party.”
Therefore, only after this procedure, if the debt is not satisfied, as set out in Article 167.4 of the LGT, “…their property will be seized, and this will be duly advised in the enforcement order.”