Key Points Tax fraud threshold: Unpaid taxes of €120,000 or more per year triggers criminal charges.
- Penalties: 1 to 5 years in prison, fines up to 600% of the evaded amount, asset seizures.
- Aggravated cases: If the amount exceeds €600,000, prison sentences can reach 6 years.
- Early action matters: Paying before formal charges can close the case without prosecution.
- Statute of limitations: 5 years for basic tax fraud, 10 years for aggravated cases.
Are You Facing a Tax Investigation in Spain?
If you are a foreign entrepreneur, freelancer, or investor doing business in Spain, you may be subject to a tax investigation by the Spanish Tax Agency (Agencia Tributaria, AEAT). Failing to pay more than €120,000 in taxes per year could result in a criminal charge for tax fraud, leading to severe penalties, including imprisonment.
The Spanish tax authorities have become increasingly aggressive in pursuing foreign residents and businesses operating in Spain. With automatic exchange of information agreements in place across Europe and beyond, hiding income has become virtually impossible. If you receive a notification from the AEAT, you need to act quickly and strategically.
At Fukuro Legal, we specialize in criminal tax defense and work alongside experienced tax advisors to provide the best legal protection for foreigners in Spain.
1. What Is Considered Tax Fraud in Spain?
Under Article 305 of the Spanish Criminal Code, tax fraud occurs when a person or company fails to pay at least €120,000 in taxes in a single fiscal year. This threshold applies to each individual tax (income tax, VAT, corporate tax) separately.
Tax fraud is not just about failing to file a tax return. It includes any action or omission that results in the Treasury receiving less than it is owed: underreporting income, inflating deductions, hiding assets, using shell companies, or failing to declare foreign accounts.
Who Is at Risk of Tax Fraud Charges in Spain?
The following groups face particular scrutiny from the Spanish Tax Agency:
- Foreign entrepreneurs or business owners selling products or services in Spain
- Digital nomads, freelancers, or remote workers generating income while residing in Spain
- Expats with companies, assets, or bank accounts in Spain that are not properly declared
- Individuals trading in cryptocurrencies without reporting gains
- E-commerce sellers operating internationally without Spanish VAT compliance
- Property owners receiving undeclared rental income
If you generate income in Spain or are considered a tax resident (spending more than 183 days per year in the country), the Tax Agency may investigate you for tax fraud.
The Difference Between Tax Avoidance and Tax Fraud
It is important to understand the distinction:
- Tax avoidance is using legal methods to minimize your tax burden. This is perfectly legal.
- Tax evasion/fraud is deliberately hiding income or assets to avoid paying taxes you legally owe. This is a crime.
- Aggressive tax planning falls in a grey area. Structures that are technically legal but lack economic substance may be challenged by authorities.
The line between aggressive planning and fraud is not always clear. If you are unsure whether your tax arrangements are compliant, seeking professional advice now is far better than facing an investigation later.
2. What Happens If You Are Investigated for Tax Fraud?
If the Spanish Tax Agency detects irregularities in your tax situation, it will initiate a formal process. Understanding each stage helps you respond appropriately and protect your rights.
Stage 1: Tax Inspection
The investigation typically begins with a tax inspection. During this phase:
- The AEAT reviews your income, tax filings, bank statements, and invoices
- They exchange information with foreign tax authorities through EU directives, FATCA, CRS, and bilateral agreements
- Your assets and bank accounts may be frozen as a precautionary measure
- You will be required to provide documentation and may be called for interviews
At this stage, having legal representation is essential. You have rights as a taxpayer that must be respected, and procedural errors by the authorities can be grounds for challenging the case later.
Stage 2: Administrative or Criminal Proceedings
The outcome of the inspection determines what happens next:
- Below €120,000: If the amount owed is less than €120,000, you face administrative sanctions (fines) but no criminal charges
- Above €120,000: The case is referred to the Public Prosecutor's Office and becomes a criminal matter
Once the case enters the criminal system, you are no longer dealing with tax inspectors. You are facing prosecutors, judges, and potential imprisonment. This is when having a criminal defense lawyer becomes critical.
Penalties for Tax Fraud in Spain
The consequences of a tax fraud conviction are severe:
- Prison: 1 to 5 years for basic tax fraud
- Aggravated prison: 2 to 6 years if the amount exceeds €600,000 or certain aggravating factors apply
- Fines: 100% to 600% of the evaded tax amount
- Asset seizures: Bank accounts, properties, and other assets may be confiscated
- Business ban: Prohibition from operating businesses or holding certain positions in Spain
- Criminal record: A conviction stays on your record and affects future employment, visas, and residency
Are you currently under investigation or have you received a notification from the Tax Agency? Contact us immediately for a confidential assessment of your situation.
3. How Can Foreigners Defend Themselves in a Spanish Tax Fraud Case?
If you are under investigation for tax fraud, you need both an experienced criminal tax lawyer and a qualified tax consultant working together. At Fukuro Legal, we coordinate with tax advisors to provide comprehensive protection.
What We Offer
- Criminal defense for tax fraud cases: Representation throughout the investigation and trial process
- Tax advisory coordination: Working with specialists to regularize your situation and minimize penalties
- Negotiation with authorities: Engaging with the Tax Agency and Prosecutor's Office to reduce fines and avoid imprisonment
- Appeals and higher court representation: Challenging decisions before the National Court (Audiencia Nacional) and Supreme Court
Strategies to Avoid Serious Consequences
Depending on your situation, several defense approaches may be available:
Pay before formal charges: If you pay the owed taxes (plus interest) before the Tax Agency files a criminal complaint, the case can be closed without prosecution. This is called regularización espontánea and is one of the most effective ways to avoid criminal liability.
Negotiate with the Prosecutor: In some cases, we can negotiate a conformidad (plea agreement) with reduced penalties. This typically involves admitting the facts in exchange for a lower sentence, often avoiding actual imprisonment.
Challenge the investigation: If there are procedural errors, violations of your rights, or flaws in how the Tax Agency calculated the debt, we can file legal challenges. Successful challenges can result in reduced amounts, exclusion of evidence, or dismissal of the case.
Dispute the criminal threshold: If the amount can be shown to be below €120,000, the case remains administrative rather than criminal. We carefully analyze the calculations to identify any errors or alternative interpretations.
4. Statute of Limitations for Tax Fraud in Spain
Tax fraud does not remain prosecutable forever. Understanding the time limits is important for your defense:
- Basic tax fraud (€120,000 to €600,000): 5 years from the date the tax should have been paid
- Aggravated tax fraud (over €600,000): 10 years from the date the tax should have been paid
These periods can be interrupted by official actions from the Tax Agency, which restarts the clock. However, if the limitation period has passed without interruption, prosecution is no longer possible. We always verify whether your case falls within the statutory period.
For administrative tax debts (below the criminal threshold), the Ley General Tributaria establishes a 4-year limitation period.
5. Aggravating Factors That Increase Penalties
Certain circumstances can significantly increase the severity of tax fraud charges. Under Article 305 bis of the Criminal Code, aggravated tax fraud applies when:
- The amount exceeds €600,000: This automatically elevates the case to aggravated status
- Criminal organization: The fraud was committed as part of an organized group
- Shell companies or tax havens: Use of companies without real economic activity or jurisdictions designed to hide assets
- Concealment structures: Complex arrangements specifically designed to hide the fraud from authorities
Aggravated tax fraud carries penalties of 2 to 6 years in prison, a 10-year statute of limitations, and typically no possibility of avoiding prison through a suspended sentence. If any of these factors apply to your case, expert legal defense becomes even more critical.
6. Special Considerations for Foreign Residents
Foreign nationals face unique challenges in Spanish tax fraud cases. Understanding these issues helps you protect both your legal status and your financial interests.
Tax Residency Rules
You are considered a Spanish tax resident if you meet any of these criteria:
- You spend more than 183 days per year in Spain
- Your main center of economic activity or interests is in Spain
- Your spouse and dependent children reside in Spain (unless you can prove otherwise)
As a tax resident, you must declare your worldwide income to the Spanish authorities, not just income earned in Spain. Many foreigners are unaware of this obligation, which can lead to unintentional tax fraud situations.
Modelo 720: Foreign Asset Declaration
Spanish tax residents must file a Modelo 720 declaration if they hold foreign assets exceeding €50,000 in any of these categories: bank accounts, securities/investments, or real estate. Failure to file or filing incorrectly used to carry extremely harsh penalties, though recent European Court rulings have limited these sanctions.
If you have not filed Modelo 720 or have filed incorrectly, it is important to regularize your situation before the Tax Agency discovers the omission.
Impact on Residency and Visas
A tax fraud conviction can have serious immigration consequences:
- Denial or non-renewal of residence permits
- Expulsion proceedings in serious cases
- Difficulty obtaining Spanish nationality
- Problems with visas and travel to other countries
Protecting your immigration status is an additional reason to address tax issues proactively and with professional legal help.
Need a Tax Fraud Lawyer in Spain?
If you are a foreigner facing a tax investigation in Spain, do not wait until you receive criminal charges. Acting quickly can be the difference between a manageable fine and a criminal record that follows you for years.
Remember the key points:
- Tax fraud begins at €120,000 in unpaid taxes per year
- Penalties include 1 to 6 years in prison and fines up to 600% of the evaded amount
- Paying before formal charges can prevent prosecution entirely
- Procedural errors and calculation mistakes can be grounds for defense
- Foreign residents face additional considerations around residency and Modelo 720
At Fukuro Legal, we are a Spanish law firm with expertise in criminal tax defense for foreigners. Our team understands both the Spanish legal system and the unique challenges faced by expats, entrepreneurs, and international investors. We communicate in English and coordinate with tax advisors to provide complete protection.
Contact Fukuro Legal today [and protect your financial future and legal status in Spain.
