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V2388-14 11 September 2014 · SG de Tributos Criterion in force
IRPF · medidas cautelares

Tax authorities may withhold income tax refunds as a precautionary measure

A taxpayer inquired whether their income tax (IRPF) refund could be withheld to settle debts owed by companies in which they are a shareholder and director. The Directorate General for Taxes (DGT) stated that the withholding of refunds may apply to one or more tax years, provided the principle of proportionality is respected.

The question raised

1) Can the tax Administration withhold the taxpayer's IRPF refund as a consequence of the tax debts settled by the Inspection against the companies of which they are the majority shareholder and sole administrator?

The DGT's ruling

The withholding of tax refunds as a precautionary measure is not limited to a single tax period. However, the measure must be proportionate to the damage intended to be avoided and in the amount strictly necessary to ensure the collection of the debt. The Administration must notify the precautionary withholding together with the refund decision. The assessment of proportionality is the responsibility of the managing tax Administration.

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