Between myself, lawyer for Bufete Buades, and the De la Mata Abogados firm (led by Carlos de la Mata and Pilar Pavón), we took on the defence of a German citizen accused of what was described as tax fraud, eventually winning the acquittal of our client. Specifically, the case involved a German citizen who failed to file a self-assessment for non-resident income tax following the sale of a property in Andratx.
Similar cases have been tried extensively in civil proceedings owing to the numerous cases of non-residents who fail to present the corresponding income tax self-assessment, for varying reasons: (i) ignorance of the specific tax; (ii) the purchaser withholding an amount insufficient to cover the tax; or (iii) tax avoidance, purely and simply.
When the amount of the avoided tax liability exceeds 120,000 euros, the Tax Agency generally initiates criminal proceedings, which are perceived as an absolute stigma, and even more so when the taxpayer is a foreign national. Successful criminal proceedings allow the Agency itself to collect the most significant amounts.
“Numerous decisions state that the Administration is required to have exhausted all possible means of notification”
The favourable judgement we are concerned with analyses two relevant aspects: Notification by edict in the administrative procedure initiated by the Tax Agency, and wilful intent to commit tax fraud.
- Notification by edict in the administrative procedure initiated by the Tax Agency
These criminal proceedings are commonly initiated after completion of an obscure and irregular procedure of notifications addressed to the tax debtor (specifically, the abusive use of notification by edict of the initiation of inspection actions), involving an administrative procedure which deprives the defendant of the proper right to defend him or herself against the inspection.
Numerous judgements, among them the judgement we are examining here, allude to the supplementary nature of notification by edict, and numerous decisions report that the Administration is required to have exhausted all possible means of notification available to it.
Likewise, both the Constitutional Court and the Supreme Court have upheld that the guarantees of art. 24 of the Spanish Constitution applicable to administrative penalty proceedings are the rights to defence and to be informed of the accusation, the exercise of which presupposes that “…//… the implicated party is summonsed to appear or duly notified of the formal opening of proceedings, as only in this way is he or she afforded an effective opportunity to mount a defence against the accusation prior to the handing down of a decision and, therefore, that the Administration follows a procedure in which the accused has the opportunity to provide and propose evidence he or she deems relevant and offer arguments in support of his or her claim (STC [Constitutional Court Judgement] 226/2007, of 22 October, FJ [Legal Foundation] 3) …//…”
The imperative to ensure that, whenever possible, the interested parties are summonsed or cited to appear has always been strongly advocated, to the extent that a summons by edict constitutes a last resort of a supplementary and exceptional nature. Methods apt to ensure receipt of the notification must first be exhausted, with every effort made to determine the whereabouts of recipients by normal means. A decision to notify by edict must therefore be founded on reasoned criteria indicating certainty, or at least a reasonable conviction, of the impracticability of normal citation means (all, STC 158/2007, of 2 July, FJ 2).
“Criminal law tries individuals on the basis of acts they have committed, rather than simply on the basis of their personal qualities or their formal relationship with the legal business in question.”
- Wilful intent to commit fraud
It is self-evident, as well as being reflected in this judgement, that criminal law tries individuals on the basis of acts they have committed, rather than simply on the basis of (i) their personal qualities, or (ii) their formal relationship to the legal business in question.
Although indisputable, it is worth remembering that the concept of objective liability does not exist in criminal law. However, and more importantly, the essential principle of guilt does exist, which means, in broad terms, that among the restrictive consequences to consider in any criminal policy is the fact that no penalty is applicable if the deed is not shown to have been caused by wilful intent or negligence.
An act which constitutes a tax offence requires the existence of wilful, deliberate conduct intended to avoid payment of tax. The author of the alleged offence must be aware of the existence of a debt or tax obligation, and omits to make the payment in an act of non-compliance with his or her formal obligations. Though article 305, which regulates the offence, is silent on the question of wilful intent necessary to constitute a tax offence, it is implicit in the term “defraudar” (to avoid taxes/commit tax fraud). Moreover, article 12 of the Criminal Code sets forth that acts of negligence will only be punished where expressly provided by the law.
The judgement in this case, which eventually acquitted the taxpayer, sets forth a very useful analysis with which to tackle these criminal proceedings, so immensely unfamiliar to the non-resident taxpayer. Criminal proceedings are a stigma for anyone, but when “suffered” in a country where the legislative culture is an unknown quantity, they become overwhelming.