20 Apr Some elusive tax practices: The missing traders and maquilas

According to the Dictionary of the Royal Spanish Academy trout is, in addition to the freshwater fish we all know, a small shop or haberdashery stall.

However, there is an unintended meaning which is unknown and is related to a missing trader fraud in VAT and in particular in intra-Community transactions, although it is not exclusive to this area since it is also given when operating any type of exemption, for example the real estate.

Some authors claim that it is due to the fact that these companies appear and disappear very easily and are very slippery. In a clear and concise manner this type of VAT fraud consists of the creation of a business structure to take advantage of the fact that intra-Community supplies are exempt from VAT.

The “missing trader” is a company created only for this purpose and its main activity is to make intra-community acquisitions of goods without VAT support for them. They usually operate over a normally short period of time and with very high activity volumes, without employees or infrastructure.

The mechanism begins with an intra-Community sale exempt from tax between a company located outside Spain and another established in the national territory, both belonging to the same business group or organization.

The missing trader who receives the merchandise, in turn sells it to another company of the organization to which the VAT affects. However, it does not pay to the Tax Office and disappears without a trace.

The fraud is aggravated when the screen society that receives the merchandise of the trout claims the return of the VAT for having supported it.

The plot is complicated when more fictitious companies are created with which to hinder the trace of the merchandise, which sometimes does not even exist, and is replaced by the circulation of invoices and false delivery notes (hence the adjective carousel).

In this case, the Tax Agency will not only not charge the VAT of the operation, but will pay the refund to which the third, if it was entitled. That is why the Tax Management Offices pay particular attention to the registrations in the Register of Intra-Community Operators (ROI).

In addition to the prior control to access into the Registry, within a visit to the registered office and a report of the taxpayer’s objective circumstances, the Tax Agency monitors companies once included in the Registry to detect those taxpayers who do not carry out intra-community transactions or for example those that when they requested the access they realized a real activity, but now are being used for fraudulent operations, proceeding to its precautionary discharge.

In addition to these controls, a subsidiary liability scenario was also created for those taxable persons who are the beneficiaries of taxable transactions, which should reasonably be presumed that the tax passed would not be declared and entered.

For practical purposes, one of the circumstances that can avoid this subsidiary responsibility is undoubtedly the prior consultation of the intra-community operator in the VIES system that is available on the website of the Treasury.

Three are the cases in which the Spanish Tax Agency will deny the discharge in the ROI or will caution the taxpayers in this census:

A) When it is established that there is no economic activity declared or of its development in the domicile communicated, or that in the fiscal domicile does not develop the administrative management and the effective direction of the businesses.

B) When the taxpayer had been unknown in the notification of any action or procedure to apply the taxes.

C) When the possible intervention in foreign or intra-Community trade operations is detected, from which the non-fulfillment of the tax obligation or the improper obtaining of benefits or tax returns in relation to the VAT can be derived.

These three circumstances have been, undoubtedly and in part, the salvation of the Treasury coffers since they have allowed a greater control by the authorities of these plots, making possible the dismissal of all those companies “suspicious” of being defrauding VAT.

 Nonetheless, many entrepreneurs and individuals, in particular, are adversely affected by this exhaustive control, since they are preventatively vetoed or involuntarily removed from the Registry with the consequent economic damage to them. 

Continuing with the elusive tax practice, we find the “Maquilas”, whose tax meaning seems to be related to economic and production systems that perform manual assemblies in industrial workshops located in countries with cheap labour conditions, whose result are products that generally target a developed country. It basically consists of the unfolding with purely evasive purposes of the productive activity in order to guarantee that the Public Finance cannot achieve the embargo of the credits that it generates. To this end, the commercialization activity that generates the credits is attributed to a company that keeps up to date with its obligations to the Tax Agency and the productive activity, instead, systematically fails to fulfil its obligations to the Treasury.

The profit rests on the productive activity that sells to the marketer at or near market prices. The benefit is anticipated to the phase in which it is fiscally interested to generate it. Fraud is closed due to the failure of the marketer to comply with its tax obligations, either because it disregards attachment orders or because it states that such credits do not really exist since they normally pay cash.

In Navarro Llima Abogados we help you to resolve any incidents related to these issues and we recommend planning properly this type of international operations.

We have a long experience in the defence of the taxpayer before the inspection and management of taxes. Whether it is a limited check or a general inspection, we firmly defend the interests of our clients, including, if necessary, the access to the Ordinary Courts of Justice, and achieving a substantial improvement to our client.

Tax Department.

Bibliography: 

1. Tax fraud in the collection of taxes. Manuel Santolaya Blay. Tax issue CISS group Wolters Kluwer.

2. Fraud and tax offense in VAT: carousel fraud, trout and other plots. Luis Manuel Alonso Gonzalez. Marcial Pons 2008.

3.http://www.agenciatributaria.es/static_files/AEAT/Contenidos_Comunes/La_Agencia_Tributaria/Sala_de_Prensa/2013-02-27_Esquema_fraude_IVA_informatica.pdf.

4. Royal Decree 1065/2007, of July 27, which approves the General Regulation of the actions and the procedures of management and tax inspection and of development of the common norms of the procedures of application of the tributes.