Law 58/2003, of 17 December, General Tax Law (LGT) is the central statute of the Spanish tax legal order. It does not impose specific taxes: it regulates the principles, procedures and guarantees governing the relationship between taxpayers and the tax authorities. Understanding its mechanisms is not optional for any company operating in Spain; it is the difference between an inspection managed with the right tools and one that ends in unnecessary assessments and penalties.
This guide covers the LGT aspects with the greatest practical impact for companies: limitation periods, examination and inspection procedures, tax liability, the penalties regime, and review routes.
Structure of the LGT: what it regulates and what it does not
The LGT is organised into six titles. Title I establishes general principles and the sources of the tax legal order. Title II defines taxes, taxpayers and the elements of the tax obligation. Title III regulates the application of taxes, with three major procedures: management, inspection and collection. Title IV sets out infringements and penalties. Title V regulates administrative review. Title VI contains provisions on tax proceedings in cases involving criminal offences against the Treasury.
The LGT does not regulate IRPF, VAT, corporate tax or any specific tax. Those matters are governed by their own legislation. What the LGT regulates is the framework: how the Administration may examine returns, what the limitation periods are, what penalties it may impose, and how the taxpayer may appeal.
Taxpayers and their categories
Art. 35 LGT defines the concept of taxpayer and sets out the categories: taxpayers, substitute taxpayers, withholding agents, advance payment obligors, successors, and — critically in business practice — liable parties.
The distinction between joint and subsidiary liability has direct procedural consequences. Under joint liability (Art. 42 LGT), the Administration may proceed directly against the liable party without the principal debtor’s debt being final or having exhausted enforcement actions. The most common scenarios include participation in third-party tax infringements, acquisition of companies with outstanding tax debts, and — relevant for corporate transactions — participation in stripping the principal debtor’s assets.
Under subsidiary liability (Art. 43 LGT), the Administration must first exhaust all collection actions against the principal debtor and, where applicable, any jointly liable parties. The most frequent scenario for companies is director liability when the debt results from infringements whose commission the director failed to prevent, despite being in a position to do so.
Tax limitation periods: timelines and interruption grounds
The limitation regime in Arts. 66–70 LGT is one of the areas where specialist advice delivers the greatest value. The period is four years for the right to assess debts, demand payment, impose penalties and seek refunds.
The calculation of the period raises practically relevant questions:
When it starts to run: from the day after the end of the voluntary period for filing the return or self-assessment. For IRPF 2022, the voluntary period ended 30 June 2023; the limitation period started 1 July 2023 and would be completed on 30 June 2027, unless interrupted.
What interrupts the period: any administrative action formally notified to the taxpayer (notification of commencement of procedure, information request, proposed assessment) and any action by the taxpayer (filing a return, applying for a payment plan, filing an appeal). Interruption restarts the period from zero.
The problem of defective notifications: when the Administration attempts to interrupt the limitation period through a notification that subsequently turns out to be defective, the interrupting effect does not occur. Examining the formal validity of prior notifications is the first step in any defence against assessments for apparently time-barred years.
Limitation of rights arising before the current LGT: the first transitional provision of the LGT establishes that limitation periods running on 1 July 2004 are governed by the previous legislation if more favourable.
Tax application procedures
Tax management
Management procedures (Arts. 123–140 LGT) are the least far-reaching. The most common in business practice is data verification (Arts. 131–133 LGT), which allows the Administration to check arithmetic discrepancies or inconsistencies between declared data and third-party information without initiating a full inspection.
Limited review (Arts. 136–140 LGT) has a slightly wider scope: it can examine declared data, income and expenditure supporting documents, and certain accounting records, but cannot request the commercial accounts or investigate bank accounts. Its resolution with definitive status creates a significant preclusive effect: the Administration is bound by the regularised elements and cannot reopen them in a subsequent procedure unless new facts or evidence emerge (Art. 140 LGT).
Inspection procedure
The inspection procedure (Arts. 141–159 LGT) is the most significant due to its scope and consequences. The AEAT Inspectorate can examine the full accounts, investigate bank accounts, request documentation from third parties, conduct searches of business premises, and issue definitive assessments.
The maximum period is 18 months, extendable to 27 months in the scenarios in Art. 150.1 LGT: taxpayers whose transaction volume exceeds the Art. 184 LIRPF threshold, or when the procedure includes examination of a related group. Exceeding the maximum period does not invalidate the actions but limits their effects on the limitation period.
The reports concluding the procedure may be of three types (Art. 154 LGT): agreed, contested and negotiated. Agreement reduces the penalty by 30%; a contested report allows submissions before the Inspectorate issues a definitive assessment.
Tax collection
The collection procedure (Arts. 160–177 LGT) is triggered when the taxpayer fails to pay within the voluntary period. The debt enters the enforcement period, with a surcharge of 5% (enforcement), 10% (reduced enforcement) or 20% (standard enforcement), plus interest on arrears and, where applicable, procedure costs (Art. 161 LGT).
The Administration may seize assets in the following order of preference: cash in current accounts, receivables, tradeable securities, wages and pensions, real property. Suspension of enforcement requires adequate security (bank guarantee, mortgage, personal surety) or, in the cases provided by law, may be agreed without security when enforcement could cause difficult or irreparable harm.
The tax penalties regime
Title IV of the LGT (Arts. 178–212) establishes a specific penalties regime that coexists with criminal tax law. Tax infringements are administrative; the criminal tax offence (Art. 305 CP) requires a defrauded amount exceeding €120,000.
Infringements are classified as minor, serious and very serious based on the conduct, concealment and fraudulent means used (Arts. 191–206 LGT):
| Infringement type | Typical scenario | Base penalty |
|---|---|---|
| Minor | Late payment without concealment, base ≤ €3,000 | 50% |
| Serious | Concealment, base > €3,000 | 50% to 100% |
| Very serious | False invoices, use of intermediaries | 100% to 150% |
Penalties are increased for repeat offending, resistance and obstruction, and use of intermediaries. Reductions apply for agreement (30%) and payment without appeal (additional 25%). The limitation period for penalties is also four years from the date the infringement was committed.
Art. 206 bis LGT, introduced in 2015, allows sanctions for conflict in the application of tax legislation when the TEAC has established settled criteria on identical or substantially similar cases.
Administrative review
Title V of the LGT (Arts. 213–249) regulates review procedures for management, inspection and collection acts. The main ones are:
Appeal for reversal (Art. 222 LGT): optional, filed with the same authority that issued the act within one month. Suspends the deadline for the economic-administrative claim.
Economic-administrative claim (Arts. 226 et seq. LGT): filed with the TEAR or TEAC depending on the amount and the issuing authority. One-month deadline from notification. The TEAC has authority to issue decisions binding on the entire tax administration (settled doctrine).
Annulment appeal (Art. 241 bis LGT): limited in scope, only available against certain formal defects and does not extend the substantive discussion.
Special review procedure (Arts. 216–221 LGT): includes a declaration of absolute nullity (Art. 217 LGT), a lesivity declaration and revocation of acts by the Administration itself. Absolute nullity is not subject to a time limit and may be sought at any time if the legal grounds exist.
The contentious-administrative route before the National High Court or the Regional High Courts requires exhaustion of the economic-administrative route.
Practical impact for companies: the highest-risk moments
Experience in tax proceedings allows identification of the moments where companies face greatest exposure:
Corporate transactions. Acquisition of a company with outstanding tax debts may generate joint liability for the acquirer (Art. 42.1.c LGT) for debts accrued in the four preceding years. Tax due diligence is essential before any company acquisition.
Intra-group restructurings. Reorganisation transactions between related entities are subject to market value verification (transfer pricing) and, if considered artificial, may be reclassified as a conflict in the application of legislation.
Company dissolution. Shareholders who receive net assets on liquidation of a company may incur subsidiary liability (Art. 40 LGT) if the company had outstanding tax debts and the amount received exceeds what they would have been entitled to after payment of those debts.
Directors. Director liability (Art. 43.1 LGT) for infringements whose commission they failed to prevent requires proof that the director was aware of the situation and had the means to prevent the infringement. Resignation from the position does not exempt from liability for acts committed during the term of office.
Raúl Herrera García — BMC
Our tax proceedings team supports companies and directors at every stage: from receipt of the notification of commencement of examination through to challenging assessments and penalties before the TEAR or TEAC. If you have received an AEAT request, a proposed assessment or a liability derivation order, contact us for an initial assessment without obligation.
