Author:
Miriam Sánchez.
Tax simulation. 3 things you should know
In business, tax planning is a key tool for optimizing financial resources. However, the line between valid strategy and practices questioned by the Tax Administration (TA) can be thin. Two essential concepts in this context are simulation (art. 16 GLT) and conflict in the application of the tax rule (art. 15 GLT). Understanding their differences is crucial to avoid legal risks and hidden costs arising from complex corporate transactions.
Differences between simulation and conflict in the tax law
Simulation involves the creation of a fictitious legal act with the intention of concealing the true nature of a transaction. In legal terms, this is usually considered an absolute fraud, since the apparent legal business does not correspond to reality. The direct consequence is the annulment of the simulated act and the reclassification of the real operations.
On the other hand, the conflict in the application of the tax rule occurs when real and valid transactions are used for the sole purpose of reducing the tax burden. This approach does not annul the operations carried out, but reinterprets them under the principle of fraud of law, adjusting the taxation to the real economic objective sought.
In the recent ruling of the Audiencia Nacional (SAN, ROJ 5488/2024), a case was analyzed where the TA alleged simulation in a scheme that included the incorporation of asset-holding companies, non-cash contributions and distribution of dividends. The NA concluded that there was no simulation, but that there was a conflict in the tax regulations, reclassifying the operations with a direct impact on the tax burden of the partners.
Impact on corporate planning
For companies, the implications of these concepts are profound. Operations designed without a comprehensive analysis of the legal framework can result in:
- Hidden costs: Retroactive tax adjustments affecting dividends or income of individual partners.
- Legal uncertainty: Risk of the TA questioning apparently valid transactions, generating penalties and surcharges.
- Administrative complexity: The need to restructure financial or legal planning over time.
How to avoid risks and hidden costs
- Specialized advice: Having experts who understand the current regulations and jurisprudence, such as the services of Cigarrán.
- Transparency and documentation: Ensure that each operation has a clear and verifiable economic-legal justification.
- Use of advanced tools: Platforms such as Holded allow centralizing and analyzing financial data, facilitating regulatory compliance.
Understanding the difference between simulation and conflict in the application of tax rules not only allows for better tax planning, but also helps to avoid hidden costs and unnecessary legal risks. In a constantly evolving regulatory environment, having expert advice and digital tools is key to ensuring business success.
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