Tax fraud offense

The crime of tax fraud, regulated in art. 305 of the Criminal Code, punishes the subject who, by action or omission, defrauds the Treasury by evading the payment of taxes, amounts withheld or payments on account, unduly obtaining refunds or enjoying tax benefits, provided that the amount of the defrauded amount exceeds 120,000 euros. This offense carries a prison sentence of 1 to 5 years and a fine of six times the amount defrauded, as well as the impossibility of obtaining subsidies, public aid or tax or Social Security benefits for a period of 3 to 6 years.

Thus, the core of this crime is fraud. What is meant by defrauding? According to the Supreme Court, in Ruling No. 209/2019, for the behavior to be qualified as a tax crime, it is not enough to omit the payment of an amount due to the Public Treasury, but it is also necessary to defraud, i.e., that the perpetrator breaches his duty by concealing the reality.

What are the modalities of tax fraud? The criminal conduct may consist of any of the following:

1. Avoidance of taxes.
2. Avoiding the payment of amounts withheld or payments on account.
3. Improperly obtaining refunds.
4. Unduly enjoying tax benefits.

The Penal Code provides a penalty exemption for the perpetrator who has regularized his tax situation. When is the tax situation regularized? Two requirements must be met: on the one hand, that the perpetrator has acknowledged and paid the entire tax debt and, in addition, that he has done so before the Tax Administration notifies him of the initiation of verification or investigation proceedings, before a complaint or accusation has been filed against him, or before he knows that judicial investigation proceedings have been initiated against him.

In addition, the Criminal Code provides for a reduced penalty, which allows the Judge to impose on the perpetrator of this crime the penalty lower by one or two degrees, provided that he/she pays the amount of the tax debt and judicially acknowledges the facts within 2 months from the date on which he/she was summoned as a defendant. This sentence reduction is also applicable to persons who have participated in the commission of the crime, provided that they actively collaborate in obtaining relevant evidence in the criminal proceedings.

Finally, Art. 305 bis of the Penal Code regulates a series of aggravated modalities, which entail the imposition of a higher penalty (imprisonment of 2 to 6 years, a fine of twice to six times the amount defrauded and loss of the right to obtain subsidies, public aid or tax or Social Security benefits for a period of 4 to 8 years), when certain circumstances are present, among others, if the amount defrauded exceeds 600,000 euros, the fraud is committed within a criminal organization….

Tax accounting crime

The tax accounting crime is regulated in art. 310 of the Penal Code, which punishes the person who, being legally obliged to keep commercial accounting, tax books or records, performs any of the following conducts:

1. Absolute noncompliance with this obligation under the direct tax base estimation system.
2. Keep separate accounting records that hide the true situation of the company.
3. Has not recorded in the obligatory books business or economic transactions, or has recorded them with figures different from the real ones.
4. Has made fictitious accounting entries in the obligatory books.

Subsidy fraud offense

The crime of subsidy fraud, regulated in art. 308 of the Penal Code, punishes the person who obtains subsidies or aid from the Public Administrations, falsifying the conditions required for their concession or hiding circumstances that would have prevented their concession. It also punishes the person who, in the development of an activity financed with funds from the Public Administration, uses such funds for purposes other than those for which the subsidy was granted.

Both behaviors are punishable by the following penalties:

100. If the amount defrauded exceeds 100,000 euros, a prison sentence of 1 to 5 years, a fine of six times the amount and disqualification from obtaining subsidies, public aid or tax or Social Security benefits for a period of 3 to 6 years.
101. If the amount defrauded is between 10,000 and 100,000 euros, a prison sentence of 3 months to 1 year or a fine of three times the amount defrauded, as well as disqualification from obtaining subsidies, public aid or tax or Social Security benefits for a period of 6 months to 2 years.

The behaviors described above do not constitute a crime if the perpetrator proceeds with the reimbursement, which must include both the amounts unduly received and the applicable late payment interest, and must be made before notification of the initiation of verification or control proceedings, before the filing of a complaint or accusation against him or before judicial proceedings are carried out that allow him to know of the existence of a criminal proceeding.

Finally, art. 308.8 of the Criminal Code allows for a reduced penalty (penalty reduced by one or two degrees) to be applied to the perpetrator who makes the reimbursement described above and judicially acknowledges the facts within 2 months of the judicial summons of the perpetrator as a defendant in a criminal proceeding. This penalty reduction is also applicable to persons who have participated in the commission of the crime, provided that they actively collaborate in obtaining relevant evidence.

Community fraud offense

Article 306 of the Criminal Code penalizes, through Article 306 of the Criminal Code, the person who, by action or omission, defrauds the general budgets of the European Union, evading the payment of amounts that should be paid, using the funds obtained for a function other than that for which they were intended, or falsifying the conditions required for their concession or concealing the circumstances that would have prevented their concession. The penalty applicable to this offense varies according to the amount defrauded:

50. If the amount defrauded exceeds 50,000 euros, the penalty is imprisonment for 1 to 5 years and a fine of one to six times the aforementioned amount, together with the impossibility of obtaining subsidies, public aid or tax or Social Security benefits for a period of 3 to 6 years.
51. If the amount defrauded is between 4,000 and 50,000 euros, the penalty to be imposed is imprisonment of 3 months to 1 year, a fine of three times the amount mentioned above and the loss of the possibility of obtaining public subsidies or aid and the right to enjoy tax or Social Security benefits or incentives for a period of 6 months to 2 years.

Social Security fraud offense

The crime of defrauding the Social Security is regulated in art. 307 of the Penal Code, which punishes the person who, by action or omission, defrauds the Social Security by evading the payment of its contributions and joint collection concepts, unduly obtaining refunds of these or unduly enjoying deductions, provided that the amount of the defrauded contributions exceeds 50,000 euros. This behavior is punishable with a prison sentence of 1 to 5 years, a fine of six times the amount defrauded and disqualification from obtaining subsidies, public aid or tax or Social Security benefits for a period of 3 to 6 years.

As with the tax offense, the conduct described above does not constitute an offense if the perpetrator regularizes his situation. Such regularization occurs when the perpetrator acknowledges and pays the full amount of the debt and must do so before he has been notified of the initiation of inspection proceedings, before a complaint or accusation has been filed against him, or before any actions are taken that would allow him to know that legal proceedings have been initiated.

In addition, the Criminal Code provides for a reduced sentence, which entails the imposition of a sentence one or two degrees lower, provided that the perpetrator pays the debt with the Social Security and acknowledges the facts before two months have elapsed since the judicial summons as investigated. This sentence reduction can also be applied to the rest of the persons who have participated in the crime, but in this case it is required that they actively collaborate to obtain relevant evidence to clarify the facts.

On the other hand, Article 307 bis of the Penal Code establishes a series of aggravated modalities, which entail the imposition of a heavier penalty (imprisonment of 2 to 6 years, a fine of twice to six times the amount defrauded and disqualification from obtaining subsidies, public aid or tax or Social Security benefits for a period of 4 to 8 years), when certain circumstances concur, among others, if the amount defrauded is greater than 120,000 euros, if the fraud is committed within a criminal organization….

Crime of improperly obtaining benefits

Finally, art. 307 ter of the Criminal Code punishes the subject who enjoys Social Security benefits or facilitates others to obtain them, by means of the error caused by the simulation or conscious concealment of facts of which he/she had the duty to inform, thus causing damage to the Public Administration. The penalty applicable to this case is from 6 months to 3 years of imprisonment and disqualification from obtaining subsidies and tax or Social Security benefits or incentives for a period of 3 to 6 years.

Some aggravated modalities are foreseen, which entail the imposition of a prison sentence of 2 to 6 years, a fine of six to six times the amount and disqualification from obtaining subsidies and tax or Social Security benefits or incentives for 4 to 8 years, when certain circumstances are present. Among others, when the value of the benefits improperly received exceeds 50,000 euros, when the acts are committed within a criminal organization…

However, the Penal Code regulates an exemption from criminal liability, which is applicable when the perpetrator returns the amount unduly received as benefits, increased by the legal interest of the money plus two points, provided that he does so before he is notified of the initiation of inspection and control actions, before a complaint or accusation is filed against him, or before they carry out actions that allow him to be aware of the initiation of legal proceedings against him.

Likewise, the judge may apply a reduced penalty, imposing the lower penalty by one or two degrees, if the perpetrator returns the amount unduly received as benefits within 2 months of being summoned to appear before the court as a person under investigation. This sentence reduction can also be applied to the persons who have participated in the crime, but in this case it is required that they actively collaborate to obtain relevant evidence to clarify the facts.

Criminal liability of legal persons

Legal entities may be criminally liable for the offenses against the Public Treasury and Social Security that we have seen above. In that case, the applicable penalty is as follows:

1. A fine of up to twice the amount defrauded, if the offense committed by the natural person is punishable by imprisonment of between 2 and 5 years.
2. A fine of two to four times the amount defrauded, if the offense committed by the natural person is punishable by imprisonment for more than 5 years.
3. A fine of six months to one year, if convicted of committing a tax accounting offense.

Likewise, the legal person will be sanctioned with the loss of the possibility of obtaining public subsidies or aid and the right to enjoy tax or Social Security benefits or incentives for a period of 3 to 6 years, and may also be prohibited from contracting with the Public Administrations. Finally, the Judge may impose on the legal entity the penalties of dissolution, suspension of activities, closure of premises, prohibition to carry out activities in the future and judicial intervention (art. 310 bis of the Criminal Code).