Fiscal governance: it is a priority for administrative councils

The regulatory changes introduced in the last decade have boosted the importance given to tax governance in the governing bodies and senior management of companies.

Over the last decade, Spain has gone from a situation in which tax issues were difficult to raise and were dealt with by governing bodies, to one in which organisations, with the support and encouragement of their boards of directors, are developing adequate tax risk management and control systems.

This trend began with the approval of Law 31/2014, of 3 December, which introduced new obligations for listed anonymous companies in terms of tax compliance. These changes have led the boards of directors to take part in the definition of their tax strategies, as well as in the review and approval of those investments or operations of a strategic nature or of special tax risk.

On the other hand, the provision also obliged these entities to develop and implement systems for the management and control of their tax risks. This has also made it possible to mitigate potential liabilities of their management bodies, and to exempt and/or, where appropriate, mitigate the corresponding criminal liability in relation to those offences against the public treasury.

From then until now, the environment has been evolving and has prompted large organisations in Spain (regardless of whether or not they are taxpayers) to focus on developing a tax compliance model. These models include factors ranging from reputational risk and protection of their corporate image to sustainability, including reporting mechanisms.

In parallel, there has been an increase in promotional activities by various national and international organisations, bodies and foundations, focused on encouraging taxpayers to prepare and publish their tax contributions in the jurisdictions in which they operate and/or to work on their tax transparency profiles, developing assessment methodologies/rating indices according to the degree of compliance.

In relation to this point, the need to publish certain information of a fiscal nature has increased.

Thus, awareness of the importance of tax governance is becoming increasingly important in the governing bodies and senior management, encouraging the implementation of procedures for the periodic reporting of certain tax information that is reviewed by the tax compliance body, senior management, the audit committee and the boards of directors of the main organisations.

All this in order to review and, if necessary, approve transactions of particular tax significance, as well as to assess the status of their tax risk management and control systems. On its return, it is becoming customary to publish, on an annual basis, those tax-related matters that have been reviewed both by the audit committees and by the boards of directors.

In February 2019, the UNE 19602 Standard – Tax compliance management systems was published. The provision establishes the requirements and provides guidelines for adopting, implementing, maintaining and continuously improving tax compliance policies and the other elements of an organisation’s tax compliance management system.

This standard allows companies to obtain a “quality certificate” on their tax compliance system after an audit process carried out by a certifying entity, both for reputational purposes and for the purpose of meeting possible requirements for public tenders or administrative procedures/procedures before public bodies, or even before the tax administration itself. In fact, during the financial year 2022, there has been a significant increase in the number of entities that are certifying their systems in accordance with this standard, and the trend is upwards.

Finally, all of the above is being combined with the need to generate an open, fluid, cooperative and transparent relationship between the different bodies that make up the tax administration and taxpayers. In Spain, the list of companies adhering to the Code of Good Tax Practices has been steadily increasing, as have those companies that submit the Transparency Report within the framework of this Code, being able to obtain feedback from the Tax Administration regarding tax criteria to be applied in relation to certain operations/transactions that may be of concern to them.

This is why certification in accordance with the UNE 19602 Standard is becoming a great tool that governing bodies are promoting to ensure that their organisations have implemented a proper tax compliance system that allows them to be aware of those relevant tax issues and, if necessary, to adopt the appropriate decisions. This certification, in short, reinforces companies’ commitment to good governance in the tax sphere, confirming the level of maturity of their tax compliance system, which is increasingly present on company boards of directors.

If you have any queries on this subject, please do not hesitate to contact us by telephone at Núria Martí García or by e-mail at nmg@btsasociados.com, we will be delighted to help you.