Penalties for billing by company?

Facing a tax penalty for alleged contractual simulation is a frustrating and often disconcerting experience. When the tax authorities interpret transactions carried out through a company as personal income, the consequences can be devastating: financial penalties, damage to your reputation and a lengthy legal battle.

However, as a recent Supreme Court ruling (STS 1838/2024) shows, having a specialized lawyer can make all the difference. This ruling highlights how poor analysis by the Administration can lead to unfair penalties that do not stand up to rigorous legal scrutiny.

A recent case: the importance of good tax defense

The ruling, which exonerated a former basketball player from a penalty for simulation, demonstrates how the Tax Authorities, in their attempt to tax certain transactions, may rely on insufficient evidence or biased interpretations. In this case, the Administration argued that the payments made by a sports club through an intermediary company were, in reality, direct income of the player.

The Supreme Court rejected this position for several reasons:

• Insufficiency of evidence: Simulation was not accredited because the evidence presented was equivocal.
• Self-interested construction: Treasury reached preconceived conclusions and adjusted its analysis to justify its position.
• Lack of proven malice: Neither the intent to deceive nor the role of those involved in an alleged simulation was proven.

What does this mean for entrepreneurs and professionals?

This case shows that the tax authorities can make mistakes in their interpretation of legitimate business transactions. Many companies and professionals use corporate structures to optimize their taxation, but this does not mean that there is simulation or fraud intention.

The problem arises when the Administration presumes fraud without sufficient evidence, something that can occur in situations such as:

• Invoice services through a proprietary company.
• Outsourcing income or dividing profits among partners.
• Using contracts with complex clauses that the Tax Authorities consider “suspicious”.

The solution: an experienced tax and accounting lawyer

A good tax lawyer can help you prove the legitimacy of your transactions and avoid unfair penalties. Here are some of the key actions a lawyer can take:

1. Reviewing and shielding your contracts: Ensure they comply with regulations and avoid ambiguous interpretations.
2. Defend yourself against tax inspections: Identify errors in the accusations and demonstrate the lack of evidence.
3. Plan sound tax strategies: Design business structures that optimize your taxation and minimize legal risks.

If the Tax Authorities have penalized you for alleged contractual simulation, you are not alone. The recent Supreme Court ruling shows that these accusations can be dismissed if they are proven to be unfounded. The key is to have an expert lawyer who knows how to protect your interests and ensure that your transactions are recognized as legitimate.

At Cigarrán Abogados, we combine our expertise in tax law with advanced tools such as Holded to offer you a solid defense and efficient tax planning.

Do you need help? Contact us today and ensure your tax peace of mind.

¿Do you need hel? At Cigarrán Abogados we can help you (+34) 91.355.85.15