Criminal law
Published on October 20th, 2026
When the director of a company defrauds the tax authorities, the conviction does not always stop with the director. If the company has a genuine business, it can also be convicted as a legal person and given its own fine, and the shareholder who controls it ends up bearing two penalties for the same act, their own and, through their stake, the company's. The Spanish Supreme Court confirmed this in its judgment 496/2026 of July 13th, in a VAT fraud case that leaves several rules useful for any small or medium-sized business.
The case came from the Audiencia Nacional (Spain's national criminal court) and concerned a VAT carousel fraud involving hydrocarbons and precious metals during 2015 and 2016. Several intermediary companies invoiced sham transactions so that the beneficiary company could deduct VAT that nobody had paid in. There were convictions for forgery of commercial documents, for offenses against the Public Treasury and for money laundering, and the Supreme Court dismissed all the appeals. The charge of belonging to a criminal organization had already been withdrawn at trial.
The beneficiary company argued that it could not be criminally liable, as its will was indistinguishable from that of its director, who was also its majority shareholder. The Supreme Court did not accept this. The company had seven employees, the capital required to operate in the hydrocarbons market and a genuine commercial business, and a company of that kind is criminally liable for the offenses its director commits in its name and for its benefit (article 31 bis.1 of the Criminal Code).
What falls outside that regime is the shell company, with no business, organization or assets of its own, set up only to commit the offense or to conceal it. Such a company is not tried as a legal person. The veil is lifted instead and whoever stands behind it answers, and what the shell holds in its name is not safe either. Several intermediary companies in the scheme, which had not even been charged, appealed the confiscation of their account balances on the ground that they had never been able to defend themselves, and the Supreme Court upheld it, treating those funds as proceeds of the offense belonging to the people who controlled them.
The usual defense of a small business is that it lacks the structure for a compliance program. The Supreme Court adopted the view of the Audiencia Nacional that control mechanisms must exist in small companies as well, even if the model is simple, and this company had none.
Under the law, the company is exempt if, before the offense, its management body had adopted and effectively implemented an organization and management model with surveillance and control measures suitable for preventing it (article 31 bis.2), and in companies authorized to file an abridged profit and loss account the supervision of that model can be taken on directly by the management body itself (article 31 bis.3).
The company asked for the fines to be halved, its own and that of its director, who held 96% of the capital. The Supreme Court rejected the idea that convicting both amounts to punishing the same act twice. In its view, the company answers for its own organizational failings and the director for what the director did. When both are fined for the same facts, the judge must adjust the amounts so that the total is not disproportionate (article 31 ter.1 of the Criminal Code).
In this case the adjustment had already been made, and the Supreme Court endorsed the practical criterion of the Audiencia Nacional, under which what the shareholder bears in total, directly through their own fine and indirectly through their company's, should not exceed the maximum provided for the offense, which in tax fraud is six times the amount defrauded (article 305.1).
Another argument that failed was the absence of a prior assessment by the Tax Agency. The judgment recalls that tax law raises no preliminary question here, that the criminal court calculates the amount defrauded within its own proceedings by applying the tax rules and that it does not have to wait for the tax inspection. The director of one of the shell companies, which had invoiced the beneficiary without having any employees or other business, was convicted as a necessary cooperator (cooperador necesario) in the tax offense.
The offense requires an amount defrauded above 120,000 euros, and for VAT, which is declared quarterly or monthly, what was defrauded over the calendar year is added together, except in criminal organizations or groups and in companies that only appear to carry on a genuine business, where the offense can be prosecuted as soon as that figure is reached (article 305.2.a). One of the companies argued that the arrest of its managers and the freezing of its accounts had prevented it from paying the VAT for the last quarter. The Supreme Court replied that the offense had already been committed when the fraudulent self-assessment was filed and that neither the arrest nor the freezing prevented the company from filing a supplementary return.
In a case like this I run two defenses at once, the director's and the company's, which do not always coincide and sometimes get in each other's way. For the company, the question is which controls existed before the events and which documents prove them, and for the director, what the amount was for each tax year and what part they actually played in each return. The first thing I assess with the client is whether regularization is still possible. As long as no audit by the Tax Agency concerning that debt has been notified, and no report or criminal complaint has been filed nor proceedings opened of which the taxpayer has formal knowledge, full acknowledgment and payment of the debt takes the conduct out of the offense (article 305.4).
This offense often crosses paths with other offenses in my white-collar crime practice, which I explain in the guide on the criminal liability of company directors. When it all starts with a dispute between shareholders, the guide on shareholder disputes and director liability explains how the civil and the criminal routes combine.
Editorial responsibility: Carles Jiménez, Spanish lawyer (Barcelona Bar No. 34.946). This note was prepared with the assistance of artificial-intelligence tools and reviewed and approved by the author before publication.
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