A few years ago, a decision was issued by the Supreme Court that established that children are not considered jointly and severally liable for tax debts related to the concealment of assets. This criterion differs significantly from the position held by the IRS and other courts. Nevertheless, the Treasury continues to pursue parents who accept donations on behalf of their children. The Central Economic Administrative Court (TEAC) has backed the Treasury by allowing parents to be held liable, even though they only acted on behalf of their children. This has triggered a protracted battle between taxpayers and the Tax Agency.

The issue in question is the donation of property to children as a strategy to avoid tax liabilities. According to Article 42.2.a) of the General Tax Law, the Treasury considers family members jointly and severally liable for tax liability if they receive property from the principal debtor through any legal business or contract and hinder the collection of the debt. However, they would only be required to pay the value of the assets and rights transferred, not the total amount of the parent's tax debt. For example, if a father has a debt of 400,000 euros and donates property to his children worth 280,000 euros, the latter would only be liable for that value.

It is important to note that liability does not depend on whether or not the taxpayer was aware of the debt at the time of transferring the assets. The tax authorities usually consider any donation or transfer as fraudulent, even if it is made before the taxpayer is notified of the liquidation of the debt. This is because the obligation to pay arises from the moment the taxable event of the tax is realized, and all the debtor's assets are subject to the payment of the tax debt.

However, in a Supreme Court ruling issued on March 25, 2021, it was established that minors cannot be considered conscious and voluntary collaborators in the concealment of assets, since they lack capacity to act. This ruling did not explicitly address the possibility of attributing legal business to the legal representatives of minors. Furthermore, the Supreme Court warned that this doctrine does not prejudge the validity of the legal transactions, nor does it prevent the Administration from taking civil or criminal action against the adults responsible in case of fraudulent practices.

Subsequently, in a resolution of the Central Economic-Administrative Tribunal (TEAC) dated May 19, 2023, it was stated that parents who accept donations on behalf of their minor children can be held liable for the tax debt. This resolution was based on Article 42.2.a) of the General Tax Law and pointed out that the hidden intention to avoid collection by the Tax Administration is evident when the donation is carried out together with the payment of the Gift Tax.

It is important to note that this resolution does not constitute a binding doctrine for the Tax Administration, since it was issued in the context of an appeal filed by the taxpayer and has not been reiterated. However, it reflects the current interpretation of the Tax Authorities on this matter.

The discussion arises as to whether those who act solely on behalf of others should assume all the legal consequences of a legal transaction in which they are not directly involved. Furthermore, the Supreme Court warns about the risk of possible tax fraud cases if the established doctrine is used inappropriately.

In view of this situation, it is recommended that resolutions declaring parents acting on behalf of their minor children to be liable for the tax debt by accepting donations that prejudice the rights of the Treasury be challenged, in accordance with Article 42.2.a) of the General Tax Law.

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