Perhaps as a consequence of the financial crisis, or due to any other reasons, the truth is that more and more clients come to us regarding their Spanish dormant companies. Most of them, who had set up the Spanish company a decade ago, had almost forgotten about its existence. However, on any given day they receive a formal requirement from the Spanish Tax Authorities (“Hacienda”) threating them to become personally joint and severally liable for the company´s debt (i.e. the company have been subject to a Tax Audit) or alternatively they realise that the Companies Registry has been closed.
The above scenario is increasingly more common and the outcome almost inevitable.
Dormant companies have most frequently cease fulfilling their tax obligations in Spain. If discovered by a Tax Audit from Hacienda the company would become liable for paying the debt itself along with sanctions and delay interests.
Further and most importantly, pursuant to Spanish legislation those who were directors as for the time of the company committing the tax offence, or even shareholders, might potentially become personally liable for payment of the Company tax debts.
At Fitzwilliam Solicitors we have broad experience in defending clients in such proceedings, although it must be highlighted that the Spanish Tax Authorities are increasingly more reluctant to accept the director’s allegations and proper legal advice is required.
Filing Annual Accounts
The Spanish Companies Act requires Spanish companies to file annual accounts at the Companies Registry. It is not always appreciated that this requirement extends to companies which have been completely dormant from incorporation or have become dormant at some point.
Late filing implies the closure of the Companies Registry page (preventing almost any event to be filed for that Company) and the imposition of penalties which now amount up to EUR 60,000. Such penalties are becoming more frequent in the recent months. This is a particularly unwelcome cost for a company with no income and no bank account.
Due Diligence Report
In light of the above, it becomes critical for a dormant company shareholder or director to deal with any contingency whether regarding taxation or accountings. At Fitzwilliam Solicitors we strongly advise our clients to do so by instructing the performance of a complete Due Diligence.
The term due diligence (DD) refers to a complete research and deep analysis of a company itself from different points of view. Outcomes of a DD are set out in Due Diligence Report which shows the existence of any contingency in the Company´s obligations and allowing the client to decide what needs to be done to regularise the situation of the same. In essence, a Due Diligence is aimed to reduce uncertainty in all aspects of the company or specifically in those related to a specific field, such as taxation.
In particular, a most typical Due Diligence Report focusing on taxation and accountings will:
- Provide complete information about any taxation or accounting wrongdoing committed by the Company in the relevant period;
- Allow making any missing accountings from scratch so that they show the true picture of the company and is compliant with Spanish legislation requirements;
- Allow the re-file of annual accounts in the Companies Registry so as to re-open access to the same and hide the imposition of any penalties whatsoever;
- Evidence any tax wrongs committed by the Company, so that they can be regularised before the Spanish Tax Authorities issuing a Tax Audit. Benefits from voluntarily regularising tax wrongdoings before being requested to do so by Hacienda are numerous and extremely beneficial for taxpayers. This will be treated in further depth in a separate post; and
- Provide enough information so as to eventually dissolve and liquidate the company.
The above is a brief example of how complex situations can be efficiently planned by taking proper advice. Of course, each case is unique and requires its own specific approach. At Fitzwilliam Solicitors we are proud to offer our clients tailored solutions to the specific matters they may face, whether they imply applying Spanish or English legislation.
Contact us at Fitzwilliam Solicitors and our dedicated team in Spain will be pleased to analyse your case in order to design the best strategy to protect your interests.