Setting up a company to carry out a business or professional activity is perfectly lawful.
The real issue is not whether you have a company.
The real issue is how that company has been structured, what activity it actually performs, how it invoices its clients, how shareholders and directors are remunerated, how transactions are recorded in the accounts, and whether the entire structure could be properly explained and defended before the Spanish Tax Agency in the event of a tax audit or inspection.
This is particularly relevant for freelancers and self-employed professionals whose turnover is increasing and who are beginning to consider whether the time has come to incorporate a Spanish limited company, or Sociedad Limitada (SL).
It is equally relevant to doctors, lawyers, architects, engineers, consultants, IT professionals, commercial agents and many other professionals who already provide their services through a company.
Above all, however, it affects thousands of SMEs, micro-enterprises and established companies that have been trading for years, whose directors increasingly ask themselves the same question:
Is my company really structured correctly, or could we have a problem if the Spanish Tax Agency reviewed what we are doing tomorrow?
Spanish Supreme Court Judgment 695/2026, dated 4 June 2026, cassation appeal 1590/2024, introduces particularly important case law in this area.
The Supreme Court has made it clear that the Spanish Tax Agency cannot automatically turn the use of an interposed professional company into a very serious tax offence on the grounds that fraudulent means have been used.
But the judgment also contains another important lesson for every business owner:
the better structured, documented and tax-compliant a company is before an inspection begins, the stronger its position will be if the Spanish Tax Agency decides to review it.
For this reason, tax and corporate prevention should form part of the growth strategy of every business.
Yes.
The Spanish Tax Agency itself accepts that a professional activity may be carried out either directly by an individual or through a company.
Therefore, incorporating an SL and invoicing through that company does not, in itself, constitute a tax irregularity.
The issue is different: the Spanish Tax Agency may examine whether the company performs a genuine economic and business function.
This is why, when a self-employed professional begins to grow, the question should not simply be:
“At what level of turnover should I set up an SL?”
The correct question is:
“What legal, tax and corporate structure is most appropriate for my business, and how should I organise it so that I can grow safely?”
At ASO Corporate, we approach company formation from precisely this perspective.
Creating a company properly involves far more than signing a deed before a notary.
It requires analysing taxation, liability, remuneration, investment, business expenses, employees, expected growth and the relationship between the shareholder’s personal assets and the company's business assets.
For international entrepreneurs or investors, Spain Corporate Legal also provides specialised advice on Investment and Company Formation in Spain, coordinating corporate structuring, taxation, employment matters, contracts and compliance.
The use of companies by individuals has long been an area of particular interest to the Spanish Tax Agency.
The AEAT has itself published specific criteria concerning the interposition of companies by individuals.
The Tax Agency expressly accepts that professionals may operate through companies, but it also warns that it may analyse whether the company has a genuine role in the activity and whether transactions have been valued correctly.
The Spanish Tax Agency may therefore examine, among other matters:
who actually provides the services;
what role the company performs;
whether the company has sufficient human and material resources;
how the activity is organised;
how clients are invoiced;
what expenses the company bears;
how shareholders and directors are remunerated;
what related-party transactions exist;
which assets belong to the company;
and whether the accounts, contracts, invoicing and tax returns all reflect the same underlying economic reality.
This is precisely why good tax advisory for companies and SMEs should not be limited to filing quarterly tax returns.
A proper tax adviser should help identify risks before the Spanish Tax Agency identifies them.
Spanish Supreme Court Judgment 695/2026, dated 4 June, makes a fundamental distinction.
It is one thing for the Spanish Tax Agency to consider that a transaction or structure involves simulation.
It is quite another for the Tax Agency to conclude automatically, solely on that basis, that the taxpayer has used fraudulent means and that the tax offence should therefore be classified as very serious.
Article 184.3(c) of the Spanish General Tax Law treats the use of an interposed person or entity as a fraudulent means when its purpose is to conceal the identity of the true offender.
That element must be proven.
The Supreme Court has held that the existence of a professional company regarded as simulated does not automatically allow the Tax Agency to presume an intention to conceal identity.
The Spanish Tax Agency must examine the specific circumstances of the case and explain why it considers that the company was used specifically to conceal the identity of the true taxpayer and to prevent or obstruct the tax authorities from carrying out their duties.
Therefore:
simulation and the use of fraudulent means are not automatically the same thing.
Because it directly affects the amount of the penalty.
The Spanish General Tax Law provides that the use of fraudulent means may result in certain tax offences being classified as very serious.
Where the offence consists of failing to pay tax that should have been paid, a very serious tax offence can, depending on the circumstances, result in a penalty ranging from 100% to 150% of the unpaid amount.
This is why the Supreme Court judgment has such significant practical consequences.
The Spanish Tax Agency cannot simply follow an automatic chain such as:
interposed company → simulation → fraudulent means → very serious penalty.
Each of those steps must be legally justified.
This distinction is essential.
The judgment does not mean that the Spanish Tax Agency can no longer adjust the tax position of professional companies.
Nor does it mean that every structure designed to reduce taxation is lawful.
And it certainly does not authorise the creation of fictitious or purely artificial companies.
The Spanish Tax Agency retains its full powers of review and inspection.
It may examine whether the company has genuine economic substance, whether sufficient resources exist, whether the transactions are genuine, whether related-party transactions have been correctly valued, or whether certain income should have been attributed differently.
What the Supreme Court has established is something else:
the tax authorities cannot automatically increase the seriousness of a penalty without proving the specific legal requirements for doing so.
The judgment is extremely important for anyone who is already facing an inspection.
But it may be even more important for businesses that do not yet have any tax proceedings underway.
The best tax defence does not start on the day a tax notice arrives.
It starts years earlier.
It starts when:
the company is incorporated correctly;
the relationship between the shareholder and the company is properly defined;
transactions are documented;
accounting records are properly maintained;
expenses are reviewed;
directors’ remuneration is analysed;
related-party transactions are assessed;
significant decisions are documented;
and contracts, accounting records and tax treatment are consistent with one another.
This is the philosophy behind ASO Corporate's advanced tax planning approach: to optimise taxation whenever legally possible while creating a business structure that can also withstand a future review by the tax authorities.
There is no need to wait until you receive notice of a tax inspection.
There are several moments when it is particularly advisable to review the way in which a company is structured:
when turnover increases significantly;
when profits rise;
when new shareholders join;
when employees are hired;
when vehicles, property or significant assets are acquired;
when shareholder or director remuneration changes;
when profits begin accumulating within the company;
when dividends are being considered;
when several related companies exist;
when a holding company is being considered;
or when the director begins to wonder whether the tax arrangements that have been used for years are still appropriate.
In such situations, a preventive tax review can be particularly valuable.
For companies with a more developed corporate structure, Spain Corporate Legal provides specialised compliance services for businesses, including tax, corporate, commercial and employment compliance.
The purpose of this type of preventive review is to analyse matters such as:
tax risk mapping;
VAT and Corporate Income Tax;
withholding taxes;
related-party transactions;
relationships between shareholders, directors and the company;
deductibility of expenses;
vehicles and other company assets;
consistency between accounting records, contracts and tax returns;
supporting documentation;
and preparation for tax requests, audits and inspections.
The objective is not to create unnecessary bureaucracy.
It is to ensure that, when someone asks “Why was this done this way?”, the company is capable of explaining and proving it.
And that can substantially change a company's position during a future tax inspection.
Many tax problems do not begin with sophisticated corporate structures.
They begin with something much simpler:
poorly organised accounting records.
Incorrectly booked invoices, unsupported expenses, shareholder-company balances that accumulate for years, undocumented loans, bank movements that are difficult to explain, vehicles used simultaneously for business and private purposes, or decisions that were never properly documented.
This is why good accounting advisory for companies and SMEs is also a tax risk-prevention tool.
Accounting records should not be prepared solely for the purpose of filing tax returns.
They should make it possible to reconstruct and correctly explain what has actually happened within the business.
At that stage, the strategy changes.
A common mistake is to respond immediately and send all the requested documentation without first analysing what the Spanish Tax Agency is actually trying to establish.
Not every tax request has the same scope.
Before responding, it is advisable to analyse:
what type of procedure has been opened;
which taxes are involved;
which tax years are affected;
which transactions are being investigated;
what information the tax authorities already hold;
what documentation has been requested;
and what consequences the response could have.
When the matter is sufficiently significant, it ceases to be a routine tax compliance issue and enters directly into the field of Corporate Taxation and Tax Agency (AEAT) Defence.
Spain Corporate Legal provides specialised assistance in tax requests, audits, inspections, challenges to tax assessments and penalties, surcharges, enforcement proceedings and directors’ tax liability cases.
A tax inspection should be managed strategically from the outset.
It is not simply a matter of supplying documents whenever the Spanish Tax Agency asks for them.
It is necessary to analyse the hypothesis being pursued by the inspectors, the facts they are seeking to prove, the evidence available and the possible tax adjustment they may be attempting to establish.
If a professional company is being challenged, it will be necessary to examine, among other matters:
whether the company genuinely carries out the activity;
what resources it uses;
what services are personally performed by the shareholder;
who enters into contracts with clients;
who bears the business risk;
how remuneration was determined;
how related-party transactions were documented;
and whether the corporate, contractual, accounting and tax documentation is consistent.
If penalty proceedings are subsequently opened, the penalty itself must be analysed independently.
A tax adjustment and a tax penalty are not the same thing in legal terms.
A tax penalty can be challenged even where a tax assessment has already been issued.
Among other issues, it may be necessary to review:
classification of the offence;
culpability;
reasoning and justification;
evidence;
proportionality;
aggravating circumstances;
alleged use of fraudulent means;
limitation periods;
procedural defects;
and respect for the taxpayer's rights of defence.
Supreme Court Judgment 695/2026 is particularly important in cases where the Spanish Tax Agency has used the existence of an interposed company to conclude automatically that fraudulent means were used.
It will now be particularly important to examine what specific evidence actually exists of an intention to conceal the taxpayer's true identity.
A company's tax risk does not always end with the company itself.
In certain circumstances, the Spanish Tax Agency may initiate proceedings to recover company tax debts personally from directors or other individuals through tax liability procedures.
For this reason, it is also worth reviewing our guide on how directors, freelancers and SMEs can defend themselves against tax liability claims by the Spanish Tax Agency.
Spain Corporate Legal also has a specialised area dedicated to legal protection for directors, executives and governing bodies, covering tax, corporate, employment, criminal and insolvency-related liability, claims by the Spanish Tax Agency and Social Security authorities, directors’ remuneration and documentation of management diligence.
As a company grows, protecting the director personally becomes almost as important as protecting the company itself.
Tax and corporate law should not be considered separately.
Articles of association, shareholders' agreements, corporate resolutions, directors' remuneration, powers of attorney, capital increases and corporate reorganisations may all have tax consequences.
For this reason, when a company's structure becomes more complex, tax advice should be coordinated with Corporate and Commercial Law advice.
The objective is to ensure that decisions taken for tax reasons are also properly supported from a corporate law perspective.
There comes a point in the development of many SMEs when a traditional administrative or accounting firm is no longer enough.
The company begins to require continuous assistance in order to:
make decisions before contracts are signed;
properly document corporate resolutions;
review transactions;
prevent tax contingencies;
manage employment matters;
resolve day-to-day legal issues;
prepare investments;
respond to official requests;
coordinate taxation and accounting;
and protect the company director.
For companies that require this level of ongoing support but do not yet need to employ a full internal legal team, Spain Corporate Legal provides Legal Retainers and Outsourced Legal Department services.
The idea is simple:
business owners should be able to obtain advice before making a problematic decision, rather than only seeking legal assistance once the problem already exists.
ASO Corporate provides tax, accounting, employment and corporate advisory services from its offices in Barberà del Vallès, Sabadell and Terrassa, while also providing online services and working with businesses throughout Barcelona and other areas of Catalonia.
Spain Corporate Legal provides a specialist service focused on companies, directors and executives throughout Barcelona, Western Vallès, Eastern Vallès and the Barcelona metropolitan area.
We regularly advise companies located in:
Barberà del Vallès, Sabadell, Terrassa, Cerdanyola del Vallès, Sant Cugat del Vallès, Rubí, Ripollet, Montcada i Reixac, Santa Perpètua de Mogoda, Castellar del Vallès, Granollers, Mollet del Vallès, Badalona and Barcelona, among other locations.
We also provide dedicated legal, tax, accounting and compliance services for companies operating from industrial parks and business areas throughout Barcelona and Catalonia.
This allows us to work directly with industrial, logistics, construction, technology, commercial and service-sector companies located in areas such as Can Salvatella, Santiga, Can Roqueta, Can Feu, Parc Industrial Riu Ripoll and other major business areas throughout the Vallès and Barcelona regions.
We analyse whether incorporating an SL genuinely makes sense, how the company should be structured, how the activity should operate, what taxation will apply and how the relationship between the shareholder and the company should work.
For foreign entrepreneurs and international investors, we can also coordinate the process of establishing and operating a company in Spain.
We can review taxation, accounting, shareholder and director remuneration, related-party transactions, business expenses, documentation and possible contingencies.
The objective is to detect problems while there is still time to correct them.
We analyse the entire file and design the appropriate administrative or judicial defence strategy.
At this third stage, the objective is no longer simply to prevent.
It is to defend.
Yes.
The Spanish Tax Agency accepts that an individual may choose to provide professional services through a company.
A separate question is whether the tax authorities may examine whether that company genuinely participates in the activity and whether transactions have been correctly valued.
No.
Supreme Court Judgment 695/2026 does not remove the Spanish Tax Agency's inspection or sanctioning powers.
It establishes that finding simulation through an interposed professional company does not automatically justify concluding that fraudulent means involving concealment of identity have been used.
The Tax Agency can analyse the specific circumstances of the company and the activity.
This is why consistency between the company's activity, structure, resources, contracts, invoicing, accounting and taxation is essential.
There is no universal turnover threshold.
The decision depends not only on turnover, but also on profits, expenses, the owner's personal income requirements, reinvestment plans, business risk, employees, assets, expected growth and the chosen remuneration structure.
Yes.
In fact, this is one of the best times to do so.
A preventive review makes it possible to identify risks while there is still sufficient room to take corrective action.
Before responding, it is advisable to identify the type of procedure involved, its scope, the tax years affected, the documents requested and the potential risk.
An apparently straightforward response can influence a much broader tax review later.
In certain circumstances established by the Spanish General Tax Law, a very serious tax offence involving failure to pay tax through the use of fraudulent means can result in a proportional penalty of between 100% and 150% of the relevant amount.
This is precisely why Supreme Court Judgment 695/2026 is so important: the use of a company regarded as simulated does not automatically justify applying the fraudulent-means provision contained in Article 184.3(c) of the General Tax Law.
In certain circumstances, tax liability proceedings may be brought against a director or other legally responsible person.
However, personal liability is not automatic and the tax authorities must establish the legal requirements applicable to the particular case.
A company that increases its turnover, hires employees, makes investments and generates profits should be able to devote its resources to continued growth.
Business owners should not have to live with the constant concern that, several years later, they may discover that important tax decisions were structured incorrectly.
The solution is not to seek artificial arrangements or aggressive structures designed simply to pay less tax.
Real protection comes from something else:
a genuine business structure, properly organised accounting, planned taxation, adequate documentation of key decisions and professionals who are able to defend those decisions legally when necessary.
Supreme Court Judgment 695/2026 is another reminder that the Spanish Tax Agency has extensive powers of review, but those powers also have limits.
Tax penalties must comply with the Spanish General Tax Law.
Aggravating circumstances must be proven.
Culpability must be properly reasoned.
And the use of a professional company cannot automatically lead to the most serious possible tax penalty.
But for business owners, the most important conclusion is probably another one:
you should not wait for a tax inspection before starting to protect your company.
If you are self-employed and considering setting up a company, if you already own an SL, SME or micro-enterprise that is generating turnover and want to know whether it is properly structured, or if the Spanish Tax Agency has already opened a tax review, inspection or penalty procedure, we can analyse your position.
Our objective is to allow you to focus on invoicing clients, investing, hiring employees and growing your business with greater peace of mind, knowing that your tax, accounting and legal structure has been designed to prevent problems and to defend your company when necessary.
ASO Corporate | Tax, accounting and corporate advisory services for freelancers, self-employed professionals and SMEs
Spain Corporate Legal by ASO Corporate | Corporate taxation, AEAT defence, compliance and legal protection for companies and directors
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