Delito Fiscal in Spain: The EUR 120,000 Tax Crime Threshold

In Spain, a tax irregularity becomes a delito fiscal – a criminal tax offence – when the amount of tax evaded exceeds EUR 120,000 per tax and per fiscal period, as set out in Article 305 of the Spanish Criminal Code. Conviction can result in imprisonment of one to five years and fines of up to six times the evaded amount. Understanding where the administrative and criminal lines intersect is essential for any international business or investor operating in Spain.

What Is a Delito Fiscal and Why the EUR 120,000 Threshold Matters

Spanish law draws a clear distinction between a tax infraction – handled administratively by the Agencia Estatal de Administración Tributaria (AEAT) – and a criminal tax offence prosecuted before the criminal courts. The threshold that separates the two is EUR 120,000 of evaded tax, calculated separately for each tax type (e.g. corporate income tax, VAT, personal income tax) and for each fiscal period. If the evaded amount in respect of a single tax and period falls below that figure, the matter remains within the administrative system. Once it crosses the threshold, the conduct may constitute a delito fiscal under Article 305 of the Criminal Code, and criminal proceedings become possible.

For foreign companies and investors, this distinction has significant practical consequences. Criminal proceedings carry reputational risk, potential director liability, and a far longer and more disruptive process than an administrative tax audit. Early awareness of the threshold – and of the behaviours most likely to trigger it – is a central element of sound tax risk management.

Legal Basis and Penalties

The primary provision is Article 305 of the Spanish Criminal Code. It criminalises the evasion of taxes, customs duties, or public contributions by any person who, through action or omission, defrauds the public treasury of an amount exceeding EUR 120,000 per tax and period. The penalties upon conviction are:

• Imprisonment of one to five years;
• Fines of up to six times the evaded amount;
• Possible accessory penalties including disqualification from public contracts or receipt of public subsidies.

The Tribunal Supremo has addressed, in a substantial body of case law, how the threshold is computed, how related transactions are aggregated, and when corporate directors may face personal criminal exposure. The court has consistently held that the threshold applies per tax and per period: a taxpayer who underpays corporate income tax by EUR 80,000 in one year and EUR 60,000 in the next does not automatically cross the criminal threshold, even though the combined total exceeds EUR 120,000. Each year is assessed separately.

The 4-year limitation period (prescripción) for tax debts under Article 66 of General Tax Law 58/2003 is distinct from the criminal prescription period. Criminal proceedings have their own prescription rules under the Criminal Code, which may be longer depending on the potential sentence; advice on the specific period applicable to a given set of facts should be sought from a qualified lawyer in Spain.

How a Criminal Tax Investigation Begins: Step-by-Step

Understanding the procedural sequence helps international clients anticipate the stages at which intervention is most effective.

Stage 1 – AEAT Tax Audit (Inspección)

Most delito fiscal cases originate in a routine or targeted tax audit conducted by the AEAT. Inspectors may request documentation, examine accounting records, and issue a provisional assessment. At this stage the matter is still administrative. Foreign entities subject to a Spanish audit should ensure they have local legal representation from the outset, particularly where transfer pricing positions, permanent establishment questions, or complex tax structuring arrangements are under review.

Stage 2 – AEAT Referral to the Public Prosecutor

If the AEAT's inspectors form the view that the evaded amount may exceed EUR 120,000 per tax and period and that fraud rather than mere error may be involved, they are required to suspend the administrative procedure and refer the case to the public prosecutor (Ministerio Fiscal) or to the criminal courts. This referral triggers a fundamental change in the nature of the proceedings. The constitutional rights of the suspect (notably the right to silence and the right against self-incrimination) become immediately relevant.

Stage 3 – Pre-Trial Investigation (Instrucción)

The investigating judge (juez de instrucción) opens a pre-trial investigation, which may include witness statements, expert accounting reports, searches, and requests for information from financial institutions. This phase can take months or, in complex international structures, considerably longer. It is during the instrucción that the available defences – including arguments about the absence of fraudulent intent, errors in the computation of the threshold, or the application of a relevant tax treaty – are most effectively developed.

Stage 4 – Oral Trial and Sentencing

If the judge confirms there is sufficient evidence to proceed, the case is committed for oral trial before a criminal court. Both prosecution and defence present expert evidence (often from forensic accountants), and the court delivers a reasoned judgment. Appeals lie to the Audiencia Provincial and ultimately, on points of law, to the Tribunal Supremo.

Stage 5 – Regularisation and Its Effect

Spanish law recognises the concept of regularización tributaria: a taxpayer who voluntarily corrects the tax position and pays all amounts owed – including interest – before criminal proceedings are formally initiated (or, in some circumstances, before the public prosecutor files charges) may avoid criminal liability entirely. This is one of the most important procedural tools available, and timing is critical. A qualified tax disputes lawyer in Spain can advise on whether the window for regularisation remains open in a specific case.

If your business is under AEAT inspection or you have received a notification that may indicate a criminal referral, we encourage you to reach out promptly. Contact our team at info@ferrazwhitmore.com or visit our contacts page to arrange an initial discussion.

Documents and Information to Gather Early

In any situation where the EUR 120,000 threshold may have been crossed, the following categories of documentation are typically central to the analysis:

• Corporate tax returns (Impuesto sobre Sociedades) and VAT filings for the relevant periods;
• Transfer pricing documentation and intercompany agreements, particularly where the AEAT has challenged the arm's-length nature of transactions;
• Board minutes and internal correspondence bearing on the tax positions adopted;
• Any prior AEAT audit reports or settlement agreements;
• Documentation evidencing registration in the Registro Mercantil and the corporate structure, especially if the group includes non-Spanish entities;
• Communications with external advisers regarding the tax structuring in question;
• Relevant tax treaty provisions and any advance pricing agreements or rulings obtained.

Foreign clients should be aware that Spanish criminal procedure gives the investigating judge broad powers to compel disclosure. Documents that appear commercial or routine in a domestic context may be seized and used as evidence. Early legal review of what has been produced – or may be requested – is advisable.

Realistic Timelines

There is no single timetable applicable to all delito fiscal proceedings. Experience suggests the following general ranges, though individual cases vary considerably:

• AEAT inspection to criminal referral: This phase can range from several months to over a year, depending on the complexity of the audit and whether the taxpayer contests the administrative assessment.
• Pre-trial investigation (instrucción): In straightforward cases, the investigation may conclude within one to two years. In cases involving multiple jurisdictions, complex corporate structures, or requests for international legal assistance, three to five years is not unusual.
• Oral trial and first-instance judgment: Typically one to three years after the close of the investigation, depending on court schedules.
• Appeals: Appeals through the Audiencia Provincial and, where applicable, the Tribunal Supremo may extend the total duration of proceedings significantly.

The 4-year administrative limitation period under General Tax Law 58/2003 means that historic tax years beyond that window will generally not generate new administrative assessments – though the criminal limitation period may differ and must be assessed on the facts of each case.

Cost Drivers and Practical Considerations

For international businesses, the costs associated with a delito fiscal investigation extend well beyond legal fees. Key cost drivers include:

• Management time: Senior personnel may be required to give evidence, respond to document requests, and attend court.
• Forensic accounting: Both sides typically instruct expert accountants. The cost and quality of the expert report can significantly affect outcomes.
• Multi-jurisdictional coordination: Where the investigation involves parent companies, subsidiaries, or transactions in other EU member states, coordinating with counsel in those jurisdictions adds complexity and cost.
• Reputational exposure: Criminal proceedings in Spain, unlike administrative assessments, become part of the public record. For listed entities or regulated groups, disclosure obligations under CNMV rules or equivalent foreign regimes may apply.
• Precautionary measures: Courts may order precautionary attachments of assets or bank accounts during the investigation, which can disrupt operations.

Common Errors by Foreign Clients

A number of recurring mistakes increase exposure for international businesses operating in Spain. Among those seen most frequently in practice:

• Treating the criminal threshold as a planning target. Structuring transactions so that each individual period falls just below EUR 120,000 can itself be treated as evidence of fraudulent intent if the AEAT takes the view that the arrangement was designed to circumvent the threshold. Robust anti-avoidance rules under Spanish law are capable of being combined with criminal provisions in appropriate cases.
• Continuing to cooperate with the AEAT after a criminal referral. Once a matter is before the criminal courts, the obligation to cooperate with the tax authority does not necessarily override constitutional rights. Clients sometimes continue supplying documents without legal advice, inadvertently providing evidence that could be used against them.
• Relying on foreign-law advice. Positions that are accepted without challenge by tax authorities in other EU member states may not be accepted by the AEAT. Transfer pricing methodologies and permanent establishment analyses in particular should be reviewed by a lawyer in Spain familiar with Spanish administrative and criminal practice before being implemented.
• Missing the regularisation window. Voluntary correction of a tax position is most effective – and most likely to prevent criminal proceedings – when taken before the AEAT has completed its audit and made a referral. Waiting for a formal assessment before seeking advice often forecloses the most advantageous options.
• Underestimating director personal liability. Spanish criminal law permits individual directors and managers to be prosecuted alongside corporate entities. Foreign shareholders sometimes assume that interposing a Spanish subsidiary insulates them from personal exposure; this assumption should be tested against the facts of each case.

Our litigation and arbitration team in Spain advises international clients at all stages of criminal tax proceedings, from initial audit management through to trial and appeal. If you have concerns about an ongoing or potential investigation, we are available to discuss the situation confidentially at info@ferrazwhitmore.com.

The Role of Permanent Establishment and Transfer Pricing

Two technical areas account for a significant share of delito fiscal investigations involving foreign groups. First, disputes over whether a foreign entity has a permanent establishment in Spain – for example, through the activities of remote employees or dependent agents – can give rise to large assessments of undeclared corporate income tax that, if they exceed EUR 120,000, may attract criminal attention. Guidance on this analysis is available in our detailed discussion of permanent establishment and remote employees.

Second, transfer pricing adjustments by the AEAT frequently generate the largest individual assessments. Where the AEAT concludes that a Spanish entity has paid excessive royalties, management fees, or interest to a related party in a lower-tax jurisdiction, the resulting assessment can be substantial. If that assessment exceeds EUR 120,000 per tax and period and there is evidence of deliberate misrepresentation, a criminal referral becomes a real risk.

Decision Checklist for International Businesses

The following questions provide a starting framework for assessing exposure. They do not constitute legal advice; each situation requires individual analysis.

• Have we reviewed our Spanish tax filings for the past four years (the administrative limitation period under General Tax Law 58/2003) against the EUR 120,000 threshold per tax and per period?
• Are any open AEAT inspections in a position where the provisional assessment could exceed EUR 120,000?
• Have we obtained and maintained contemporaneous transfer pricing documentation for intercompany transactions involving our Spanish entity?
• Have we analysed whether any employees working from Spain may have created a permanent establishment?
• If there is a potential underpayment, has the window for voluntary regularisation been assessed?
• Are the directors and officers of our Spanish subsidiary aware of their potential personal exposure under Spanish criminal law?
• Do we have Spanish-qualified legal and tax counsel engaged who can respond quickly if the AEAT investigation escalates?

If the answer to any of these questions is uncertain, a structured tax risk management review by a qualified law firm in Spain is a prudent step. To discuss how Ferraz & Whitmore can assist, please write to info@ferrazwhitmore.com or visit our contacts page.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.