Criminal Defence for Tax Fraud: Technical Assistance in Tax Evasion Investigations

Criminal defence for tax fraud (delito fiscal) encompasses specialised legal assistance in criminal investigations for offences against the Public Treasury under Article 305 of the Penal Code, which punishes with one to five years' imprisonment and a fine any person who defrauds the national, regional, foral or local public treasury by evading the payment of taxes, withheld amounts or payments on account, where the evaded shortfall (cuota defraudada) exceeds €120,000. Article 305 bis CP, introduced by LO 7/2012 and amended by LO 6/2022, increases the penalties where the shortfall exceeds €600,000 or specific aggravating circumstances apply, and extends the limitation period to ten years. We accompany clients at every stage of the criminal economic proceedings: from the first AEAT inspection steps through to trial and appeals before the Provincial Courts and the Supreme Court.

When a tax inspection becomes criminal proceedings

The boundary between a tax inspection and criminal proceedings for tax fraud is not always apparent to the taxpayer until it is too late for preventive action. The AEAT is obliged under Article 180 of the General Tax Act (Ley General Tributaria — LGT) to refer the matter to the Public Prosecution when its inspection activities reveal evidence of an offence against the Public Treasury. From that point, the administrative penalty proceedings are suspended and the administration loses jurisdiction over the matter.

The most common indicators that trigger a criminal referral include: the existence of false invoices or parallel accounting, the use of corporate structures in low-tax jurisdictions without genuine economic activity, significant discrepancies between the declared tax base and the taxpayer’s assets or lifestyle, or the detection of transfers to third parties without apparent legal cause suggesting concealed remuneration.

The defence’s action before the formal referral to the Public Prosecution — or, in any event, before the investigated person has been notified of formal proceedings — opens the possibility of regularisation under Article 305.4 CP, which completely extinguishes criminal liability. Once formal proceedings have commenced, the regularisation window closes and the strategy must adapt to the specific procedural phase.

The basic offence and the aggravated offence: Articles 305 and 305 bis CP

Article 305 of the Penal Code punishes tax evasion exceeding €120,000 with one to five years’ imprisonment and a fine of one to six times the evaded shortfall, together with the loss of entitlement to obtain public grants or subsidies and the right to tax incentives or Social Security benefits for a period of three to six years.

Article 305 bis, introduced by LO 7/2012 and subsequently amended, establishes the aggravated offence with penalties of two to six years where any of the following circumstances apply:

• The evaded shortfall exceeds €600,000, the threshold the courts describe as “major evasion”.
• The fraud is committed within a criminal group or organisation.
• Intermediary persons, fiduciary transactions or instruments, or tax havens, are used to make it more difficult to identify the taxpayer or the person responsible for the offence.

LO 6/2022 of 28 December, reforming the Penal Code in respect of misappropriation of public funds and corruption offences, amended the limitation period for Article 305 bis from five to ten years, equating it with the most serious offences in the Spanish criminal catalogue. This reform has beneficial retroactive effects for investigated persons whose conduct predates the reform if the five-year period had not expired at the date of its entry into force.

Regularisation under Article 305.4 CP: extinguishing criminal liability

Tax regularisation is the most effective mechanism available to the taxpayer at the pre-criminal stage of the administrative investigation. Article 305.4 of the Penal Code provides that the taxpayer who regularises their tax position in relation to the debts that were subject to evasion, before the tax administration has notified the commencement of verification or investigation proceedings directed at establishing the evaded tax debts, will be exempt from criminal liability.

Regularisation requires the cumulative satisfaction of two conditions: the express acknowledgement of the debt and its payment in full, including the principal, late payment interest and applicable surcharges. A partial regularisation — or one in which payment is deferred without adequate security — does not produce the criminal liability-extinguishing effect.

The effect of complete regularisation is the extinction of the taxpayer’s criminal liability, not as a mitigating circumstance but as a ground for excluding punishability. This means that, if the regularisation is valid, the Public Prosecution must request the discontinuance of the proceedings. Our team works in close coordination with our AEAT inspection defence practice to assess the viability of regularisation in each specific case.

Concurrence with other economic offences

Tax fraud rarely occurs in isolation. The most frequent concurrence situations in the practice of the criminal courts include:

Money laundering (Art. 301 CP). Where the evaded amounts are invested in assets to disguise their illicit origin — real estate, overseas deposits, corporate participations — a medial or real concurrence with the money laundering offence may be established. The Supreme Court has clarified in several decisions that tax evasion can, in certain circumstances, constitute the predicate offence for money laundering. Double criminalisation has very significant punitive consequences that the defence must address with solid arguments distinguishing between the enjoyment of evaded funds and autonomous laundering.

Fraudulent asset concealment (Art. 257 CP). Where the taxpayer under investigation for tax fraud conceals, transfers or encumbers assets to prevent the Public Treasury from recovering the tax debt, a real concurrence with the fraudulent asset concealment offence may arise. Defence in these cases requires a coordinated strategy that addresses both charges simultaneously.

Document fraud (Art. 392 CP). The issuance of false invoices, the falsification of accounting records or the use of forged commercial documents as a means of evasion may give rise to a medial concurrence between tax fraud and document fraud. In these cases, the penalty for the medial concurrence is higher than that applicable individually for tax fraud.

Precautionary asset measures and how to challenge them

One of the most burdensome aspects of criminal proceedings for tax fraud is the adoption of precautionary asset measures that can paralyse business operations or prevent the disposal of assets essential to the business. The examining court may order, at the request of the Public Prosecution or the State Legal Service, the attachment of real estate, bank accounts, company participations or any other asset of the investigated person in an amount sufficient to cover the civil liability derived from the offence — which includes the evaded shortfall, late payment interest and procedural costs.

The defence can challenge precautionary measures by establishing: the absence of criminal suspicion (fumus boni iuris) — that the evidence of an offence is insufficient; the sufficiency of the security offered through a bank guarantee or voluntary mortgage; or the disproportionality of the measure in relation to the amount of civil liability claimed. In cases involving operating businesses, it may be possible to request the substitution of attachments by guarantees that do not compromise the business’s operations.

Agreed pleas and their impact on sentencing

The agreed plea (conformidad) in criminal proceedings — an agreement between the defence and the prosecution on the characterisation of the facts and the sentence — is a procedurally significant institution in tax fraud cases. The Criminal Procedure Act allows the defendant who agrees to the sentence requested by the prosecution to avoid a full trial.

In tax fraud cases, the agreed plea is typically negotiated where the evaded shortfall has been partially paid or secured, where there is uncertainty about the legal characterisation that makes the trial outcome uncertain, or where the investigated person actively cooperates with the investigation. The sentence agreed in a conformidad may benefit, where applicable, from the mitigating circumstances of damage repair or cooperation with the administration of justice.

Personal liability of directors and tax advisers

Tax fraud liability does not fall only on the principal taxpayer. Directors who materially participated in the adoption of the fraudulent accounting and tax decisions may be personally liable as principals or accessories to the offence. Tax advisers or accountants who actively participated in designing the evasion scheme — not merely as executors of instructions — may also be charged as co-participants.

The extension of criminal liability to an adviser or director who was unaware of the fraudulent nature of the transaction requires establishing the intentional subjective element, which the defence can challenge by demonstrating the absence of intent — error as to the factual or legal prerequisites of the conduct — or good faith action based on technically reasonable criteria.

Regulatory framework

• Article 305 CP — Basic tax fraud offence. Threshold: €120,000. Penalty: one to five years.
• Article 305 bis CP — Aggravated offence. Threshold: €600,000. Limitation period: ten years (LO 6/2022).
• Article 305.4 CP — Tax regularisation extinguishing criminal liability.
• Article 310 bis CP — Corporate criminal liability for tax offences.
• Article 180 LGT — AEAT obligation to refer to the Public Prosecution.
• LO 6/2022, of 28 December — Reform of the limitation period for Article 305 bis CP.
• STS 963/2021, of 9 December — Criteria for concurrence between tax fraud and money laundering.
• STS 544/2019, of 7 November — Requirements for tax regularisation as a ground for extinguishing criminal liability.

This service is part of our criminal and corporate compliance practice.