What does the tax lien consist of in Spain?
In this section, we explore the topic of the tax lien and how this tax procedure works. The tax lien is a measure taken by the spanish tax administration to secure the payment of outstanding debts. It is a legal process in which the taxpayer’s property or assets are held as collateral until the tax obligations are settled.
What is a tax lien?
The Tax Administration in Spain, which is responsible for the management and collection of taxes in Spain, has the power to seize goods and assets of individuals or legal entities with outstanding tax debts.
The collection of these debts is a power granted to the Administration. Financial institutions collaborate in the collection of taxes without being responsible for direct management or collection.
The collection process may be voluntary or enforced. When payments are not made voluntarily, the Administration may proceed to seize the taxpayer’s assets until the debt is fully settled.
What are the causes that can lead to a seizure by the tax authorities?
The seizure by the tax authorities is a measure that is taken when there are debts with the tax authorities. There are several causes that can lead to a seizure by the tax authorities, the most common being non-payment of taxes and tax fraud.
Non-payment of taxes is a frequent cause for seizure. If a taxpayer fails to comply with tax obligations, such as not filing tax returns or not paying taxes owed, the tax authorities may initiate seizure proceedings to ensure collection of the debt.
Another cause that can lead to seizure by the tax authorities are debts owed to the tax authorities. If a taxpayer accumulates a large amount of debts with the tax authorities and fails to make the corresponding payments, the tax authorities can take legal action to recover the money owed.
Finally, tax fraud can also be grounds for seizure by the tax authorities. When a taxpayer is found to have committed significant tax fraud or evasion, legal action can be taken, such as seizure of assets to compensate for losses to the public purse.
It is important to bear in mind that seizure by the tax authorities is an extreme measure and is taken as a last resort when all other options have been exhausted. It is therefore essential to comply with our tax obligations and maintain a healthy financial situation to avoid this type of situation.
Payment of Taxes in Voluntary Period
There is a deadline for paying taxes on a voluntary basis. Tax assessments issued by the Administration must be paid within this period. If the taxpayer does not settle the debt within this time, the executive collection period begins through the enforcement procedure, by means of an enforcement order that orders the execution against the debtor’s assets.
In this link you can see the taxpayer’s calendar of the tax agency until the end of 2023.
What are surcharges in the Executive Period?
This is a surcharge added to your debt if you have not paid on time.
During this period, there are three types of surcharge:
- Surcharge: 5%, applied when you settle the outstanding debt before the notice of enforcement order is served.
- Reduced surcharge: 10%, applied when the debt and the surcharge are paid before the end of the deadline for payment in the enforcement period.
- Ordinary surcharge: 20%, applied when the debt is paid after the deadline for payment in the enforcement period.
These surcharges are mutually incompatible and are calculated on the total amount of the debt not paid during the voluntary period. The ordinary surcharge is the only one compatible with interest on late payment (20%).
Property Seizure Procedure
If the taxpayer does not settle the debt after notification of the order for enforcement, a seizure order is issued on the taxpayer’s assets to collect the amount owed, surcharges, interest and costs of the procedure.
In this process, the seizable and non-seizable assets are determined, as well as the order of seizure, following the regulations established:
- Money in cash or in bank accounts.
- Credits, securities and short-term rights.
- Wages, salaries and pensions, being unattachable up to the limit of the Minimum
- Interprofessional Wage.
- Real estate.
- Interest and income obtained from business activities.
- Commercial or industrial establishments.
- Jewellery, precious metals and antiques.
- Movable goods.
- Long-term credits.
What assets are unseizable?
Certain assets, such as household furnishings, clothing and certain assets intended for the subsistence of the debtor and his family, are unattachable. The same applies to assets necessary for the debtor’s profession and assets expressly declared as such by law.
How to avoid or solve a seizure by the tax authorities?
The Inland Revenue is notorious for being a biscuit monster and will not leave you alone, ever. If you have a debt with the tax authorities we advise you not to hide but to talk to the tax authorities.
When faced with the possibility of a tax lien, it is important to take steps to avoid it or deal with it effectively. The key is to know and apply legal strategies that allow you to negotiate with the tax authorities and find viable alternatives for payment.
One way to avoid tax liens is to establish direct communication with the tax authorities. It is advisable to contact the Tax Administration to find out about the situation and seek an amicable solution. In many cases, a payment agreement can be reached through negotiations and mutually beneficial agreements. The tax authorities want to get paid, plain and simple. They usually ask you to pay a part now and defer the rest.
When you are seized, request the administrative file to verify the legality of the procedure and justification of the seizure. If you detect irregularities, you can challenge it with administrative or contentious appeals.
As a last resort, once the administrative channels have been exhausted, you can file a contentious-administrative appeal with the courts.
Effects of attachment on the taxpayer's financial and personal situation
Tax liens can have significant effects on the taxpayer’s financial and personal situation. One of the most common consequences is the blocking of the taxpayer’s bank accounts, which prevents access to funds and makes it difficult to conduct financial transactions.
In addition, garnishment may also limit the sale or disposition of garnished property. This means that the taxpayer will not be able to sell or transfer ownership of the seized property without prior authorisation, which affects the taxpayer’s ability to generate income or liquidate assets.
Another important effect of garnishment is the impact on the taxpayer’s reputation and credibility. Being subject to a garnishment can negatively affect your image with suppliers, business partners and even family and friends.
It is important to note that each case of garnishment is unique and the consequences may vary depending on factors such as the amount owed, the duration of the garnishment and the applicable tax laws. It is therefore advisable to seek expert legal advice to fully understand the specific effects of garnishment on a given financial and personal situation.
