The Code of Good Tax Practices is introduced into our legislation through the UNE 19602 standard, as one more leg of the Code of Good Corporate Governance established by the Capital Companies Act.
Adherence to or acceptance of the Code of Good Tax Practices requires the express commitment of the administrative body, usually the Board of Directors, to follow a policy of compliance with tax rules.
This commitment must take the form of:
1º Defining the company’s tax policy
2º Establishing internal control systems to prevent deviations in the defined tax policy (tax frameworks)
3º Appointing a “Tax Compliance Officer” as responsible for the control mechanisms working properly.
In this way the responsibility, which falls on the Board of Directors for errors, bad tax practices or aggressive tax planning, will be safeguarded, avoiding economic, criminal and reputational risks.
Taxes in general and corporate income tax in particular, from an accounting point of view, constitute an additional expense in the Profit and Loss account of companies.
Naturally, the objective of the General Directorate is to optimize the company’s accounting result, being one of the measures to reduce costs of all kinds. It is therefore reasonable to think that reducing tax costs in a legal way will be part of the objectives pursued. The difficulty in interpreting the tax rules and the changing criteria followed in their application by the Spanish tax authorities mean that the General Directorates of the companies seek to apply those interpretations that most favor the reduction of the taxes that must be paid. This often leads to the assumption of a risk that is poorly assessed.
For this reason it is necessary that the tax risk and its possible correction be evaluated in a completely objective manner, and by persons or entities whose professional management is not measured in terms of the company’s profit and loss account. Consequently, the Tax Compliance Officer must be at the service of the Board of Directors and must not have any organizational, functional, labor or contractual dependence on the Company’s Management.
It is an interesting option for the Board of Directors to consider outsourcing the “Tax Compliance” function, entrusting an independent person or firm with the task of implementing and monitoring the control mechanisms, ensuring that the different departments of the company follow the tax compliance policy established by the Board of Directors.
The persons or firms that must provide this service must have proven knowledge of the Spanish tax system, experience in its application, as well as experience in relations with the Spanish tax administration, including those that involve defense of the rights of the taxpayer.
Our firm offers a “Tax Compliance” service to large, small and medium-sized companies, which consists of:
