Can a company provide its accounting records on paper and refuse access to information stored on its computers? A recent ruling by Spain’s Central Economic-Administrative Tribunal, TEAC, has brought this issue back into focus.
The Tribunal has upheld a penalty of more than €500,000 imposed on a company that prevented access to certain digital information during a tax inspection. However, the case does not mean that the Spanish Tax Agency can freely examine every computer within a company.
The key questions are what information is being requested, why it is needed and how access is carried out. At LEIALTA, we explain the details below.
What happened in the case decided by the TEAC?
The Spanish Tax Inspectorate was reviewing the company’s Corporate Income Tax and VAT for several tax periods, specifically 2015 and 2016. During the inspection, it requested access to information relevant for tax purposes stored on the company’s computer systems.
The company refused and argued that the computers were located in constitutionally protected premises. Instead, it provided documentation in paper format.
However, the Tax Inspectorate offered the company the option of accessing the data from another location. The company also rejected this alternative, and this point proved particularly important.
The TEAC considered that providing printed documents did not replace access to the digital data requested by the Inspectorate. In addition, the Tax Agency needed to verify whether the stored information actually matched the documentation that had been provided.
Therefore, the penalty was not imposed because the company prevented inspectors from entering constitutionally protected premises. Rather, it resulted from the refusal to provide tax-relevant information stored on its computers, despite being offered an alternative way to examine it elsewhere.
The Spanish Tax Agency can request information stored digitally
Spanish tax legislation allows the Inspectorate to examine information related to a company’s tax obligations.
This may include, for example:
- Accounting records.
- Invoices and registers.
- Databases.
- Computer files.
- Software related to accounting or tax management.
Therefore, the fact that information is stored digitally does not prevent it from being reviewed.
In addition, the Spanish Tax Agency may require certain data to be provided in the electronic format in which it is stored. For this reason, submitting paper documentation alone may not be sufficient in some inspection procedures.
But the Spanish Tax Agency cannot access information without limits
Although the Tax Agency can request certain information, the powers of the Inspectorate are not unlimited.
First, the information requested must be related to the tax inspection being carried out. In addition, greater safeguards apply where access affects protected premises or particularly sensitive information.
Therefore, requesting specific accounting files is not the same as carrying out an indiscriminate review of everything stored on a computer. Each situation must be assessed according to the scope of the inspection and the information requested.
What should a company review?
These situations can create difficulties when there is no clear internal protocol. For this reason, companies should know in advance:
- Where accounting and tax information is stored.
- Who can provide the necessary technical access.
- Which periods and files the Spanish Tax Agency is requesting.
- Which information is relevant to the inspection.
- How any incidents during the inspection should be documented.
Companies should also bear in mind that a general refusal to cooperate can have significant consequences. The Spanish General Tax Law allows penalties to be imposed for resistance or obstruction of certain tax inspection activities.
In some cases, these penalties can reach substantial amounts depending on the company’s turnover.
Digital information also forms part of a tax inspection
The TEAC ruling does not grant new powers to the Spanish Tax Agency. However, it does reinforce an important point for companies: tax information does not cease to be subject to inspection simply because it is stored on a computer.
Therefore, during a tax inspection, companies should avoid both an automatic refusal and indiscriminate access. The important thing is to understand what the Tax Agency is requesting, the scope of the inspection and how the information should be provided.
At LEIALTA, we support companies with the analysis of their tax and accounting obligations and during proceedings before the Spanish Tax Administration.
Proper preparation makes it easier to respond to these procedures with greater certainty and helps avoid rushed decisions when digital information is requested.
