09 Sep 2019

Fiscal Inconsistency and the repercussions.

The concept of Fiscal Inconsistency began to gain importance when, in May, the Spanish Tax Authorities (AEAT) announced that a self employed person could receive a letter to explain some fiscal inconsistencies, which is basically invoicing below the sector average and is more than enough reason for the Treasury to knock on your door.

The letter included a notice for those self-employed workers who invoice below the sector average. The purpose of the notification was to notify them of the possible arrival of an inspector to their business establishment to verify that the business accounts have been prepared in accordance with reality.

In general, all self-employed people who work in the same activity – and in the same area – have a similar turnover. Therefore, when one of these businesses presents a profit or loss very different from that of its competitors this is called ‘fiscal inconsistency’ and the alarms of the Administration are raised.

However, this situation does not necessarily have to be a case of tax fraud; it could be due to other reasons such as a bad run or inefficient management of resources but should the invoicing continue to be below average it will draw attention from the Tax Authorities.   All data from taxpayers is registered and broken down by sector, activity and year so it is easy for them to investigate.  They include studies such as gross and net margins, the percentage of card and cash charges, and everything related to the industry in which the business operates. These inconsistencies are not a sufficient reason for a penalty. However, it is enough for the Authorities to contact the self-employed person for the first time so that the inspector appears at the establishment.

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Information by E.B.F Consulting S.L.  E.B.F Consulting has been providing tax and accounting services to expatriates in Europe since 1999. Office is based in Lanzarote, Spain.  Visit www.ebfconsulting.com for more details. Copyright © E.B.F Consulting 2019

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