Spanish tax authorities can seize all your savings

by Lorraine Williamson
tax authorities

MADRID – According to the law in Spain, the non-seizable wage is equal to the minimum wage (€1,000 gross p/m). Nevertheless, the Spanish tax authorities can seize all your savings that exceed that amount. This is even true if it concerns your salary from the previous month. 

Even if the additional amount on your account consists of (parts of) previous salaries that in themselves do not exceed the value of the minimum wage. The Central Economic-Administrative Court (TEAC) has now clarified this following a case brought by a pensioner. He stated that he needed the remaining balance on his checking account to pay his electricity bill. This was debited from his account every two months. 

Under Spanish law, the minimum wage (SMI) is €1,000 gross per month. This is divided into 14 payments per year (€14,000 gross per year). Therefore, that amount should be shielded from possible official embargoes from government administrations. This would include the tax authorities or the Seguridad Social. Theoretically, that means people who owe money for tax and who have an income that does not exceed the minimum wage can fully keep that income. 

Protection only applies to the last monthly income 

Despite this, the TEAC has determined that the protection only applies to the last monthly income received. This means that the tax authorities can impose an embargo on all money saved that exceeds one minimum monthly income (€1,000). This is despite it coming from a monthly income equal to or less than the SMI of previous months. 

Embargo directly or at the source 

The controversy arose from the interpretation of Article 607.1 of the Civil Procedure Act (LEC). It states here that the “salary, income, pension, remuneration or the equivalent thereof, which is equal to or less than the SMI is considered non-seizable”. From that amount, the government administration can embargo (embargar) the debtor’s account or directly at the source (at the payer, for example, the pension fund or the company where the debtor works). 

The appeal made by the retired taxpayer that the amounts accrued in his current account came from pensions already subject to the statutory embargo. These, in his view, could not be classified as savings; the TEAC held that “only the last amount deposited into the account as salary, wage or pension can be calculated”. 

The court added that “the balance available on the retiree’s current account on the date of the embargo less the amount of the last pension payment is fully covered by the embargo. Furthermore, this is  whether or not it arises from the payment of previous pensions.” 

The TEAC also endorsed the same interpretation in another recent resolution. This also concerned a pensioner who received a monthly pension of €721.18. Moreover, they who had collected €879.27 in his current account. Furthermore, the tax authorities seized the balance that exceeded the last wage bill. 

“The tax authorities do not take into account non-seizable income” 

Lawyers admit in the newspaper Expansion that until now it has been customary for the Spanish tax authorities to seize the balance of a debtor-taxpayer without distinguishing whether it concerns non-seizable income. Normally, in those cases, it is sufficient to submit an appeal to an alternative source showing that the amount of the salary is irrecoverable (or that it was already subject to an embargo at the source up to the legal limit). In that case, the government administration refunded the incorrectly collected amount. 

Freehand to empty the debtor bank account 

José María Salcedo, a partner of the law firm consulted by Expansion, explains; “This could change, taking into account the recent resolutions of the TEAC. They stipulate that limits on the embargo do not take into account the balance on the account. deposited and not consumed during the month in which it is paid out”. 

Salcedo continues: “This interpretation gives the tax authorities or other government administration a free hand to empty the taxpayer’s bank account. This is even though only a salary is deposited into it that is not seizable.” 

“Very dangerous interpretation” 

Salcedo concludes that the TEAC criterion is “a very dangerous interpretation for taxpayers”. It allows the tax authorities to seize all income that has not been spent after a month. This is “without a minimum possibility to save in the event of unforeseen events”. This is particularly damaging to low-income taxpayers. 

See also: Spanish tax authorities also crush citizens 

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