Cancellation of the Tax Domicile and Inspections from Scratch
The recent ruling by the Spanish Tax Agency (TEAC) marks a turning point in the management of disputes over tax domicile changes. For those of us who work in tax matters, the message is clear: if the tax domicile is cancelled, it does not mean that the Treasury must restart the entire inspection process from scratch. This is not a "clean slate."
In this specific case, the Tax Agency assigned a tax domicile in Galicia to a taxpayer who had declared it in Madrid. After litigation, the courts concluded that there was insufficient evidence to justify the transfer. However, the important nuance introduced by the TEAC is that it is only possible to speak of nullity by operation of law when the Administration's lack of territorial jurisdiction is absolutely evident from the outset. A mere disagreement in interpretation or a minor error is not enough.
In practice, if the Treasury initiated its actions, supported by an administrative agreement that was valid at the time, those actions remain legal until a resolution nullifies them. If that agreement is later annulled due to insufficient evidence, this does not automatically render all prior actions void.
In this case, the Tax Agency used various indications (consumption records, deeds, bank accounts, etc.) to justify the domicile in Galicia. The National Court, however, considered that they were insufficient and annulled the change. However, although the Galician TEAR declared all the actions void, the TEAC corrected the decision: these actions are not void by operation of law, but voidable. The difference is significant: absolute nullity requires the entire procedure to be redone, while voidability allows errors to be corrected without having to restart from the beginning.
The Supreme Court had already established this criterion: if the Administration had valid legal support when it acted, even if it is later annulled, there is no manifest incompetence. Only if the Administration acts without any legal basis can we speak of radical nullity.
For companies and tax advisors, this criterion provides certainty. If the inspection was initiated on a legal basis, the proceedings are valid until a resolution nullifies them. Annulment due to lack of evidence does not require the entire procedure to be redone, unless any legal protection was lacking from the outset.
Ultimately, the TEAC's criteria limit radical nullity in these cases and reinforce legal certainty, preventing the Administration from having to repeat its actions entirely due to simple formal or evidentiary defects. This is an essential nuance for those who manage tax risks and disputes with the Tax Agency.
