Supreme Court declare an inspection procedure inadmissible

Maio Legal’s Tax Department has obtained the Supreme Court’s ruling that the use of an inspection procedure is inadmissible because it has not expressly declared the expiry of a previous management procedure.

The ruling

In a ruling dated 21 September 2023, the Supreme Court has stated that the Tax Administration is obliged to expressly declare the expiry of the maximum legal period for notifying the corresponding tax assessment in a tax administration procedure initiated by means of a tax return. Otherwise, it is not possible to initiate a subsequent inspection procedure in respect of the same tax concept and tax period, nor can the documents and evidence obtained in the lapsed procedure be incorporated in this new procedure.

The ruling resolves a case in which the Tax Administration initiated an inspection procedure without the previous administration procedure having been terminated for any of the reasons set out in article 130 of the LGT. The Tax Administration argued that these were different procedures and that, therefore, it was not necessary to declare that the administrative procedure had lapsed in order to initiate an inspection procedure on the same concept and period.

The decision

The Supreme Court rejects this argument and considers that the express declaration of forfeiture is necessary to guarantee taxpayers’ legal certainty. In this way, taxpayers will be able to know the procedural channels through which the administrative action is being carried out at any given time and the reports and documents that, originating from a previous procedure, are intended to be used by the Administration in a new one.

The ruling also underlines that the forfeiture occurs automatically on the mere expiry of the legally established period, regardless of whether there is an express declaration. However, in order to avoid any ambiguity, the Tax Administration is obliged to issue this express declaration of forfeiture once the maximum legal period for notifying the assessment has expired, in those cases in which it is intended to initiate a new procedure. In this context, the Supreme Court emphasises that the lack of an express declaration of forfeiture means that all the proceedings in the second procedure cannot be considered independent of the initial procedure, and are therefore also vitiated by the forfeiture of the latter.