Tax evasion and the sanctions regime for foundations in Spain

To fight tax evasion and to avoid manipulation of foundations for the development of activities that do not have any connection with a foundation’s purpose, as well as the creation of economic networks whose existence rests on the constitution of a foundation, the regulation differentiates clean activities executed by a company for the accomplishment of its purpose from market activities that can be used as a way of financing the foundation.

Only foundations respecting legal requirements will receive subsidies and fiscal advantages frequently obtained by non-profit organizations.

In this respect, to carry out the purpose of a foundation, the Law of 2002 requires clarification of at least 70 per cent of the revenues obtained by the foundation. The Law also regulates the recruitment of people or other entities linked to the foundation.

The sanctions regime for foundations in Spain

The protectorate will apply the sanctions regime introduced by the regulation. If individual responsibility is found in the committed infraction, the people liable will be the members of the administrative body of the foundation and the secretary of this body, if he does not belong to the administrative body. The infractions will be divided into several levels, serious and very serious, and they will be sanctioned by an array of measures ranging from warnings to fines, whose value will vary from 1.000 to 30.000 Euros, or the loss of a shareholder’s position in the administrative or management body of the foundation as well as a prohibition from performing these functions for a period from 5 to 10 years.

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