A trip to Disneyland, some curtains from El Corte Inglés and the salary of the housekeeper. These are some of the expenses they bill through their companies, which also include the ownership of mansions, yachts, aircraft and exclusive cars. In Spain, more and less sophisticated to minimize their tax burden and, in some cases, evade taxes. These practices, while sometimes bordering on legality, can involve aggressive tax planning techniques that allow high-wealth holders to hide assets, disguise income, and take advantage of loopholes to evade. The Tax Agency, aware of these tactics, has implemented a series of mechanisms and strategies to combat them. In 2023, almost 1,000 control files allowed the recovery of 502 million euros in favor of the Public Treasury, at a rate of half a million per taxpayer.
It all started in 2018, when the agency launched the Central Coordination Unit for the Control of Relevant Assets, a group dedicated to monitoring these high taxpayers with the aim of coordinating the inspection work. Since then, 5,410 files have been closed, which, together, had been evaded or defrauded.
The agency, according to José María Peláez, spokesperson for the Association of State Treasury Inspectors, monitors a group of more than 170,000 taxpayers, which includes the main companies in the country—in addition to their partners—as well as artists. , athletes and other personalities. “It is a living census that is constantly moving,” says Peláez. “For example, years ago and now.” It is a kind of risk group. That is to say, not everyone who is inside defrauds, but rather they have the potential to do so. What is clear, he adds, is that it is very difficult for someone to leave once they have entered, unless it is a company that has gone bankrupt.
The central coordination unit, continues José María Mollinedo, general secretary of the union of technicians of the Ministry of Finance Gestha, is called that because it is dedicated to analyzing the “distorting elements” that set off alarms. From here, once it understands that something does not add up, the group directs the information it has collected to the headquarters of the Tax Agency corresponding to the tax domicile where the great fortune in question resides, where they take control of the inspection. .
One of the most common methods in these practices is. These business structures allow the wealthy to charge personal expenses such as the maintenance of luxury villas, expensive vehicles—from yachts to airplanes—or vacations as if they were company vacations. The objective is for companies to deduct these expenses as if they were part of their economic activity, which artificially reduces their taxable profits. To this is added the deduction of VAT, avoiding both the payment of taxes on these goods and services and their personal taxation. The problem, Peláez ironically, is that a society cannot wear a Rolex, ride a yacht or go skiing. “This is where our work to dismantle everything comes into play.”
The inspector puts on the table a series of real examples in which a high net worth person has tried to pass off his private expenses as if they belonged to the company. From dinners in restaurants to luxury watches, including the gardener’s bills, the housekeeper’s salary, receipts from El Corte Inglés or trips for the whole family. These last cases, the inspector explains, “are, so to speak, of high shabby assets.” What is widespread, he adds, is the use of company assets by the partner without there being a formal lease or transfer of use contract. In this case, they use the entity’s properties, such as mansions, secondary residences or vehicles, without paying for it, which allows them to enjoy these assets without paying taxes for their personal use.
Along these lines, Mollinedo continues, in recent years the agency has identified in an automated manner the users of high-value homes located in Spain, but whose formal ownership corresponds to foreign companies whose real owners are unknown. The same has been done with another 2,500 opaque companies, in this case based in Spain, which own more than 2,800 luxury villas, mainly on the Costa del Sol and the Balearic Islands. These, designed to hide the true owners, often involve multiple levels in different countries and trusts, making it extremely complicated to trace the flow of money or assets.
luxury stores
To ensure that nothing escapes their eyes, agency officials use different sources of information. The 2012 tax amnesty – which required the declaration of assets abroad with a value greater than 50,000 euros – allowed several high taxpayers to be put in the spotlight in recent years. Now, in addition, the Treasury uses form 347, which must be presented by any entity that sells a good or service for more than 3,000 euros, reflecting the buyer’s data in the event that it is a legal entity. “There are also individualized requests to banks or notaries in case there is suspicion from a taxpayer,” adds Peláez.
In addition to this, Mollinedo recalls, the agency launched the catalog of suppliers of luxury goods and services four years ago. There are jewelry stores, leather stores, art galleries, boutiques, luxury vehicle brands, social clubs, restaurants, wealth investment managers or premium travel companies that allow us to focus on taxpayers who have high incomes, but who escape the direct control of the reduce their income tax returns thanks to the use of intermediary companies and other instruments.
International tax planning is another key tactic. Many large fortunes place their assets in tax havens or low-tax jurisdictions, such as Luxembourg, Switzerland or the Cayman Islands, using complex structures to hide the identity of the true owners of the assets. These structures, known for their opacity, make it very difficult for technicians and inspectors to track the effective control of assets. In some cases, double taxation agreements signed with other countries are taken advantage of. In others, operations carried out in Spain with cards are tracked offshore to identify the owners. Furthermore, Peláez recalls, the agency has developed big data to dismantle the false residence of high taxpayers who say they live in Andorra, Monaco or San Marino, but who spend more than 183 days a year in Spain, the minimum necessary to be considered a resident.
With all these practices it is possible to reduce the tax bases and personal income tax contributions and do the same with the wealth tax, since assets in the name of the company are exempt. The same can be done with corporate tax through all expenses that would be considered deductible. In addition to this, the operation can also be planned to minimize the payment of inheritance and gift tax.
