Is Rent Deductible for Lawyers in Spain? Income Tax Rules Despite VAT Exemption
Content:
The Spanish General Tax Law (Ley General Tributaria – LGT) regulates the tax penalty system in Title IV (Articles 178 to 212). Its objective is not merely punitive, but preventive: to encourage voluntary compliance while sanctioning negligent or fraudulent conduct.
Understanding how tax infringements are classified, and which sanctions apply in each scenario, is essential for taxpayers and advisors alike.
1. General Principles of the Tax Penalty System (Article 178 LGT)
Article 178 establishes the basic principles governing tax penalties in Spain:
- Tax penalties are administrative in nature, not criminal.
- Penalties are imposed only when culpability exists.
- Each infringement must be legally defined (principle of legality).
- Penalties must be proportionate to the seriousness of the conduct.
This means that objective liability is not allowed: a taxpayer cannot be sanctioned without fault or negligence.
2. When Is a Tax Infringement Committed? (Article 183 LGT)
According to Article 183, a tax infringement exists when a taxpayer commits an intentional or negligent act or omission that breaches tax rules.
Typical infringing behaviors include:
- Failure to pay taxes.
- Failure to file tax returns.
- Filing incorrect or incomplete returns.
- Breaching formal or information obligations.
If there is no culpability (for example, reasonable interpretation of the law), no penalty should be imposed.
3. Classification of Tax Infringements (Articles 184–187 LGT)
The LGT classifies infringements into three categories:
a) Minor Infringements
These occur when:
- There is no concealment.
- No fraudulent means are used.
- The economic damage is limited.
They usually involve simple negligence or errors.
b) Serious Infringements
Defined by the presence of:
- Concealment of relevant data, or
- Significant incorrect declarations affecting the tax due.
c) Very Serious Infringements
These involve fraudulent means, such as:
- False invoices.
- Artificial structures or sham transactions.
- Accounting manipulation.
The classification directly affects the percentage of the penalty applied.
4. Failure to Pay or Underpayment of Taxes (Article 191 LGT)
Article 191 regulates one of the most common infringements: failure to pay the tax debt resulting from a self-assessment.
- The penalty is calculated as a percentage of the unpaid amount.
- The percentage depends on whether the infringement is minor, serious, or very serious.
- Aggravating factors include concealment and fraudulent means.
Late payment without concealment usually results in surcharges, not penalties, provided no infringement exists.
5. Undue Tax Refunds and Improper Benefits (Articles 193 and 194 LGT)
- Article 193: sanctions for unduly obtained tax refunds.
- Article 194: sanctions for improperly applying tax benefits, exemptions, or incentives.
Even if no refund is actually received, requesting it incorrectly may still constitute an infringement.
6. Failure to File or Incorrect Filing Without Economic Damage (Article 198 LGT)
Article 198 covers breaches of formal obligations, such as:
- Failure to file tax returns or informative statements.
- Filing them late or with incorrect data.
- Errors that do not cause direct economic loss to the tax authorities.
Penalties here are usually fixed monetary amounts, not percentages.
7. Obstruction, Resistance or Refusal to Tax Audits (Article 203 LGT)
Article 203 sanctions conduct that obstructs the tax authorities’ work, including:
- Refusing to provide documentation.
- Delaying inspections.
- Repeated failure to respond to official requests.
These penalties apply regardless of whether a tax adjustment is ultimately made.
8. Special Infringements: False Invoices and Fraudulent Means (Article 201 LGT)
The use or issuance of false or inaccurate invoices is treated as a particularly serious infringement.
Consequences may include:
- High monetary penalties.
- Loss of tax benefits.
- Increased scrutiny in future audits.
This provision is especially relevant for VAT and corporate tax matters.
9. Reductions of Penalties (Article 188 LGT)
The LGT encourages cooperation through significant penalty reductions:
- 30% reduction for acceptance of the assessment.
- 25% additional reduction if the penalty is paid voluntarily and not appealed.
- 50% reduction in cases of settlement agreements (“acts with agreement”).
In practice, timely cooperation can reduce penalties by more than half.
Final Remarks
The Spanish tax penalty system under the LGT is structured, proportional, and fault-based. Not every mistake results in a sanction, but negligent or fraudulent conduct can lead to significant financial consequences.
Early regularization, proper documentation, and professional advice remain the most effective tools to manage tax risk and avoid penalties under Spanish tax law.
Need clarity on what you can deduct as a lawyer in Spain?
At Innotaxes, we help professionals structure their expenses correctly and avoid issues during tax audits. Get in touch to review your specific case.