Understanding Tax Obligations and Administration Procedures
Tax Obligations and Administration
Termination of Tax Liability
Tax liability can be terminated in several ways:
- Payment
- Prescription
- Compensation
- Remission
- Insolvency
Payment
Payment is the most common way to extinguish tax liability. It involves delivering the full amount owed to the Treasury, authorized offices, or entities. Payment must meet the following conditions:
- Identity: The payment must correspond to the specific tax owed.
- Integrity: The debt is considered paid only when fully satisfied.
- Indivisibility: The administration cannot be forced to accept partial payments.
Payment Recipients
Payment should be made to the competent authority or authorized entities. Payment to an unauthorized entity is invalid.
Place and Time of Payment
Payments are typically made at banks. For stamp taxes, payment is made when the tax is used. Voluntary payment periods for tax debts from administrative liquidations vary depending on the notification date. Specific regulations apply to collective debts and regular reporting. Executive payment periods also depend on the notification date.
Payment Suspension
Payment can be suspended without collateral in two cases:
- When a refund is due from another tax and the taxpayer indicates the intention to use it to offset the debt.
- When the same operation has already been subject to another tax.
Payment Allocation
Taxpayers can allocate payments to specific debts during the voluntary period. In enforcement, the administration applies payments to the oldest debt.
Deferment and Fractionation
Tax debts can be deferred or fractionated upon request if the taxpayer’s financial situation prevents timely payment. This excludes debts paid through stamps and withholding taxes, except in specific cases. Deferment requires a bank guarantee or insurance bond, but other collateral may be accepted. Default interest applies.
Debt Relief
Tax debts can be condoned only under specific legal provisions.
Compensation
Tax debts can be offset against recognized credits. Taxpayers can apply for compensation, or it can occur automatically in certain cases.
Prescription
Prescription occurs when a certain period passes without the right being exercised or the obligation being acknowledged. The general prescription period for tax rights is four years.
Insolvency
Proven insolvency can lead to the extinction of tax debts.
Tax Administration Powers
Introduction
The Tax Administration has the power and duty to collect taxes. These powers are regulated by law and subject to judicial review.
Powers and the Law
The administration’s powers are defined by law and can be formal (no administrative freedom) or discretionary (limited choices within legal boundaries). Misuse of power occurs when the power is used for a purpose other than intended by law.
Specific Powers
- Liquidation Power: The power to determine the tax due.
- Inspection and Research Power: The power to verify taxpayer compliance.
- Collection Power: The power to recover tax debts, including forced collection.
- Sanctioning Power: The power to punish tax offenses.
- Review Power: The power to review administrative actions.
General Principles of Tax Procedures
Information and Assistance
The Tax Administration must provide information and assistance to taxpayers. This includes publishing legal texts, providing personalized information, and answering queries.
Tax Consultations
Taxpayers can submit written consultations on the interpretation of tax law.
Advance Pricing Agreements
Taxpayers can request advance and binding valuations for tax purposes.
Social Partnership
The Tax Administration encourages collaboration with taxpayers to improve tax compliance.
Tax Procedures
Tax procedures can be initiated ex officio or by request. They involve investigation, documentation, and termination with a resolution.
Tax Assessments
Tax assessments are decisions that determine the tax due or the amount to be refunded. They can be provisional or final.
Evidence and Notifications
Tax assessments must be notified to the taxpayer and include specific information.
Management Procedures
Introduction
Tax management involves the ordinary application of tax laws, including processing returns, recognizing benefits, and monitoring compliance.
Initiation of Tax Management
Tax management can be initiated by a tax return, self-assessment, data communication, or ex officio by the administration.
Management Procedures
Different procedures apply depending on how the tax management process is initiated. These include procedures for returns, verification of data, verification of values, limited verification, and complete verification.
Fundamentals of Tax Management
Tax management aims for effectiveness, cost limitation, and respect for taxpayer rights.