Are you giving the tax authorities reasons to audit you? The Spanish tax authorities are focusing on the self-employed.

There are many situations in which the tax authorities may turn up at a self-employed worker's premises to carry out an inspection. In most cases, these officials examine the business because they have found a discrepancy in the accounts or an unusual level of invoicing.

The Spanish Tax Agency (AEAT) regularly carries out inspections to prevent tax fraud offenses. It usually conducts them at random, although for justified reasons. Below we set out the main reasons why it carries out inspections.

Too many deductible expenses

Claiming too many deductible expenses in order to pay less tax is a common practice among the self-employed and one of the main reasons that give rise to inspections by the Tax Agency.

Requesting a VAT refund

Another factor that usually increases the likelihood of a tax inspection is applying for a VAT (IVA) refund, especially when the amount is large. The Tax Agency will often want to check whether the figures add up or whether there is any error in the refund request.

Applying for an intra-Community VAT number

An intra-Community VAT number (NIF intracomunitario) makes it possible to carry out VAT-exempt transactions within the European Union. That exemption tends to invite abuse.

Applying for an intra-Community VAT number may therefore set off alarm bells and lead to the dreaded visit from tax officials.

Failing to file a tax form

It may also happen that one of the forms the self-employed worker is required to file is not submitted on time and in the proper manner. Failure to file a mandatory form is grounds for an inspection or review by the Tax Agency.

Applying for grants

Grants may also give rise to a review. The tax authorities tend to scrutinize them closely to ensure that they have been correctly reported (and obtained).

Discrepancies between quarterly and annual returns

Quarterly returns must match the corresponding annual returns. This is a basic rule that, if not complied with to the letter, will lead to a visit from the tax authorities.

Random inspections

A significant percentage of inspections occur purely at random. The Tax Agency carries out random inspections of SMEs and self-employed workers in order to detect irregularities in their accounting.

How should you proceed in an inspection? Rights and obligations during an inspection

The law provides that self-employed workers have a series of obligations and rights when an inspector turns up at their business to examine its activity.

Specifically, the self-employed worker's obligations are as follows:

1. To allow the inspector to access the premises when the inspector has a court order. In fact, the official will not need the self-employed worker to be present during the inspection.

2. When the officials wish to use the business's computers, the self-employed worker may not refuse and must cooperate as far as possible.

3. The self-employed worker must provide all documents of tax relevance: accounting books, computer files, auxiliary books, software, and invoices for tax years that are not yet time-barred.

4. The inspector is entitled to make copies of documents or hard drives if the inspector considers it appropriate, except for confidential data, and the self-employed worker must allow this.

5. The business's employees may be questioned and must confine themselves to the truth.

Having listed the self-employed worker's obligations, it is time to focus on the rights that the self-employed worker may invoke throughout the process:

1. The inspector may only access the premises with written authorization from the tax authorities' delegate for the area or tax domicile, and the self-employed worker is entitled to ask to see it before letting the inspector in.

2. Furthermore, even if the inspector holds this authorization, the self-employed worker may refuse access if they consider it appropriate and demand a court order.

3. Under the Constitution, a private home is inviolable. In other words, if the self-employed worker works from home, a court order will indeed be essential to carry out the inspection.

4. If they have a tax adviser or a lawyer, the self-employed worker is entitled to postpone the process until that adviser or lawyer is present.

5. The self-employed worker may require the inspector to show their documentation and credentials.

6. Unless a court order provides otherwise, the self-employed worker is entitled to require that the inspection take place during business hours.

7. The self-employed worker may refuse access to safes, locked drawers, or similar places that may contain confidential documents that could affect privacy, the right to the inviolability of correspondence, or the right not to incriminate oneself. A court order is required to carry out this type of search.

8. At the end of the inspection, when required to sign the official records (diligencias), the self-employed worker may refuse to do so if they believe the document is untrue or contains errors and inconsistencies.

Keeping your information organized and up to date will be your best protection against an inspection. Be cautious: do not leave this important matter to chance.