Ready to hear what it’s really like getting a Spanish tax inspection?
You’re in the right place.
I’ve recently been inspected by the Spanish tax people myself, and I’ve lived to tell the tale.
So – humble public servant that I am – I thought it might be useful to tell everyone out there how it went down. Be prepared, though: since the topic is taxes, this is not the most interesting story you’ll ever hear.
Far from it.
If you want to skip this one, I don’t blame you. You can check out my article Sex, Booze and Phrasal Verbs for something more exciting, from back when I was a single guy with no responsibility and a net worth in the low four figures.
Anyway, up till recently, my relationship with Hacienda had been uneventful.
I’d collect receipts and issue invoices, and send them off to my accountant, who’d come back once a quarter with some large amount of Estimated Tax I owed to Hacienda.
I’d grumble, but pay it. Then in June, the accountant would hit me with an even larger bill – what was left over after I paid all that Estimated Tax was my IRPF: Impuesto sobre la Renta de Personas Físicas.
As a “persona física” and Spanish tax resident, I had no choice. I’d pay more.
Grumble, grumble. The money would fly out of my bank account, never to be seen again.
You’re a Spanish tax resident if you physically spend 183 or more days a year in Spain, whether or not you can claim residency elsewhere. Shakira is finding this out the hard way.
Of course, I also file taxes in the US, because for some insane reason the US wants to stay on top of everybody – even those who live abroad. Thanks to Taxes for Expats for making that whole thing much less painful.
In any case, this “five tax bills a year” thing was an okay arrangement. I did my part, and they left me alone… If you can really call taking a third of my income plus monthly social security payments “leaving me alone” – but I digress.
But then, earlier this year: Tax inspection!
People have been asking about this, so here goes…
Several months ago my doorbell rang.
“Carta Certificada!” said the woman on the other end of the telefonillo.
As someone who’s constantly dealing with lots of taxes, immigration processes, and various bureaucracies, let me tell you: I spent a very long minute contemplating all the terrible reasons why I could be getting a certified letter while the mail carrier brought it up to my door.
Really got the blood moving, that otherwise uneventful Tuesday morning.
Finally, the elevator doors hissed open, and the cartera handed me the letter. I signed and tore the thing open. Tax inspection!
Well, it had to happen some time.
I scanned the seven pages on my phone and sent the document off to my accountant. Basically, according to my understanding, they’d found some “irregularities” with my 2021 return, and they wanted to see my receipts.
I later read that the law had recently changed, making it legal for Hacienda to inspect people’s books without any real reason – so maybe that had something to do with it. Also, according to this page, Hacienda has a “strategic plan” to earn 8% more this year than last… A strategic plan that involves inspecting online businesses especially.
The fact any part of the Spanish bureaucracy is capable of making and sticking to a “strategic plan” comes as something of a surprise to me, and probably others as well. One does not interact with the Spanish government and come away with the impression that there’s a lot of strategic planning going on.
However, when it comes to screwing over small businesses, apparently they go all in. You can download a PDF of Hacienda’s strategic plan here. It’s 132 pages long.
So you’ve been tax inspected: what to do now
Anyway, there’s some back and forth with my accountant. He needs to see all my receipts, which is interesting, because I already sent him all my receipts – the whole 2021 tax preparation business was – (allegedly) already based on my receipts.
Short caveat: my original accountant sold the firm to some larger company a couple of years ago, so the new guy actually didn’t do my 2021 taxes. Still, I figured they’d be around somewhere.
Oh well. Now he can’t find them.
I send him back a bunch of information, and he sends it off, then tells me to wait for another letter from Hacienda. Anywhere between two weeks and several months, he tells me.
I wait several months, and finally, I hop on the website – gaining access to the Spanish tax agency’s website is a half-day ordeal in itself, which I talk about here – and find a new letter waiting for me. For some reason, it didn’t come to my house, it was just available on the web for several weeks. This time they want written justification for a long list of expenses.
For example: Do I really need to have an internet connection at home?
Why yes, I do. Among other things, so that I can file my taxes.
I send the new document to my accountant, and he hems and haws.
He can produce a list of justifications for my various expenses, but have I really been deducting occasional business lunches?
Well, yeah, because they told me I could. Always on weekdays, never weekends or holidays, lunch and not dinner, and with payment justified with the credit card receipt. Up to a limit of 26 euros per day.
Yes but did I really NEED to go out for lunch, or could I have just stayed at home and eaten a fried egg at my desk while continuing to type with my free hand?
If you take a walk, I’ll tax your feet
Again, I was only deducting lunches because they told me to. Now I also need an excuse to eat lunch?
I tell the accountant that yes, I needed to try all those restaurants for articles on the blog. Best International Restaurants in Barcelona, for example. The Top Restaurants in Barceloneta. The vacuous hipster horror which is Brunch and Cake.
Is that sufficient justification?
Mr Accountant frowns, and puts a link to the Chorizo Chronicles in his letter to Hacienda, saying I do restaurant reviews, and calls it a day.
A few days later I get a text message. They’ve accepted most of my expenses. But not my internet bill. Not my mobile phone. And – get this – not the receipts that are printed in Catalan.
Officially, the language used by Hacienda is Spanish, according to what they send me, and if I want to deduct receipts printed in Catalan I’ll need to get a sworn translation.
This is more than a bit ridiculous – and according to a lawyer friend, would never hold up in court. But having already spent plenty of money on tax preparation this year, I’m not about to sue the tax authorities over a couple of receipts.
In any case, it’s wildly hypocritical from a government that’s just spent a bunch of time and money broadcasting that they want to make Catalan an official language in the Spanish parliament, as well as the European Union.
I accept the terms of the letter, and get on the Hacienda website to pay the back taxes I owe. Technically, the accountant points out, they’ve accepted more than 90% of my expenses for 2021. It’s just a few little things they’re arguing about.
A few days later I get another text. Here’s the “Sanción”. It’s a letter that’s 5 pages of scolding, in barely-comprehensible bureaucratic Spanish, followed by a bill for another few hundred euros. The quantity will be reduced if I pay on time.
Moving on with my life, post tax inspection
So. One hundred and thirty three euros.
That’s my fine, for the alleged “bad behavior” of deducting my internet bill, buying a cheap mobile phone, and presenting some receipts in Catalan without having them translated..
I still maintain that I was only doing what my original accountant told me to do. But like I said, he sold the company a year or so ago, and the people I’m dealing with now don’t know anything about it.
Oh well. All in all this was a bit of an annoying and unnecessary situation, but no worse than anything else I’ve dealt with from the Spanish government. In the end, it was a few letters back and forth, some stress, and a new tax bill to pay – and I’m already more than used to those.
Anyway, that’s about all I’ve got for today.
I’d like to congratulate Hacienda for having such a detailed strategic plan to screw me – and other small online businesses. I really wasn’t expecting that.
And so, without further ado, I shall now sign off, and go do something that actually earns me some money. These bills ain’t payin’ themselves.
Daniel AKA Mr Chorizo.
P.S. If you want to donate to fine independent journalism, please consider sending some money here to the Chorizo Chronicles. I promise I’ll declare it to Hacienda on my next quarterly statement, so they’ll get their “fair share” as well.
P.P.S. This weekend is Daylight Saving Time, again. The EU said they were going to get rid of that years ago, and they still haven’t. Jerks. Here’s more about that: Spanish timetable got you down? Blame Hitler!
P.P.P.S. That previous link is just a clickbaity title. Although Spain’s choice of time zone was originally Hitler’s fault, it’s been 80 years – I blame the current government. But if you really want to blame Hitler for something, I don’t know, maybe read about the Spanish Civil War from the perspective of George Orwell or the much more conservative Peter Kemp. Enjoy!