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The Spanish Constitution guarantees the existence and sustainability of a public Social Security system for all citizens, along with adequate social benefits. This is a constitutionally recognised legal right that requires both administrative and criminal protection to prevent non-payment of contributions.
The current Spanish Criminal Code criminalises fraud against Social Security under Article 307:
1.- Any person who, by act or omission, defrauds Social Security in order to evade payment of contributions or jointly collected amounts, to unlawfully obtain refunds thereof, or to improperly claim deductions of any kind, with fraudulent intent, where the amount of contributions evaded or refunds or deductions improperly claimed exceeds fifteen million pesetas, shall be punishable by a custodial sentence of one to four years and a fine of between one and six times the said amount.
The penalties set out in the preceding paragraph shall be applied at their upper range where the fraud is committed under any of the following circumstances:
a) The use of intermediary persons in such a way as to conceal the identity of the true party liable to Social Security.
b) The particular significance and seriousness of the fraud, having regard to the amount defrauded or the existence of an organisational structure that affects or may affect a plurality of parties liable to Social Security.
2.- For the purpose of determining the amount referred to in the preceding paragraph, account shall be taken of the amount defrauded in each assessment, refund or deduction, with the total amount defrauded being referred to the calendar year where such amounts relate to a period of less than twelve months.
3.- Criminal liability shall not apply to any person who regularises their position with Social Security in respect of the debts referred to in paragraph one of this article, provided they do so before being notified of the commencement of inspection proceedings aimed at determining such debts, or, where no such proceedings have been initiated, before the Public Prosecutor or the legal representative of Social Security files a criminal complaint or report against them.
The exemption from criminal liability set out in the preceding paragraph shall equally extend to that person in respect of any ancillary documentary offences which, exclusively in connection with the debt subject to regularisation, they may have committed prior to bringing their situation into compliance.'
CRIMINAL OFFENCES:
The provision in question identifies three scenarios that attract criminal penalties:
· EVASION OF CONTRIBUTION PAYMENTS:
This offence consists in evading the payment of Social Security contributions and jointly collected items. This is understood to mean leaving the Social Security General Treasury (TGSS) unaware of the existence of facts that give rise to, and determine the amount of, a debt to Social Security, in other words, concealing data that triggers the obligation to make contributions.
The key distinction from the non-payment of declared but unpaid contributions lies in the concealment of the circumstance subject to contribution. There is an absence of the information needed to activate collection mechanisms, whereas if the relevant data regarding the situation subject to contribution is provided (for example: registration or enrolment under a particular Social Security scheme) but the obligation to contribute is not met, the Social Security General Treasury has means at its disposal to proceed with the assessment and recovery of the outstanding contribution. This explains the different treatment the legislature applies to evasion through fraud or concealment, as opposed to total, partial, or late non-payment of contributions that may be pursued by the Treasury through enforcement proceedings, conduct which is, in such cases, subject only to administrative sanctions.
The most common forms of contribution evasion were set out in the Social Security General Treasury Circular of 12 March 1998:
- Failure to submit affiliation and registration applications for workers, and to make the corresponding contributions on their behalf.
- Failure to submit contribution documents without payment of contributions and other jointly collected items (this offence is not committed where the TC2 form is not submitted but the contribution is paid directly to the Social Security General Treasury, since the offence requires evasion of payment, not merely informal payment).
- Submission of contribution documents containing concealed or falsified data, such as the number of workers, contribution group, actual wages, contribution bases, etc.
For the concealment or omission of data to constitute a criminal offence, there must be fraudulent intent, that is, the perpetrator must act with knowledge and deliberate will, with dolus (intentional wrongdoing). Where the responsible party acts without any intention to defraud, through mere negligence or disorganised conduct, no criminal offence is committed, and only an administrative infraction applies.
The Criminal Code refers to contributions without specifying whether these are employer contributions, employee contributions deducted from payroll, or both. It should be understood as encompassing both, given that the Supreme Court (ruling of 31 May 1997) held that the obligations placed on the employer are identical regardless of whether they relate to the employer's own contributions or those of the employees, to such an extent that, if the employer fails to make the relevant deduction at the time of paying employees' remuneration, it cannot do so afterwards and becomes solely liable for payment of the full amount of contributions (Article 104 of the General Social Security Act). The ruling therefore concluded that evasion of Social Security contributions covers both employer and employee contributions, and that the only offender is the employer, whose fraudulent conduct is penalised whether it consists of failing to pay the employer contribution or failing to pass on the employees' contributions. The employer is thus defined as the sole party responsible to the General Social Security Treasury.
· UNLAWFUL OBTAINING OF REFUNDS:
This offence occurs when a refund of contributions or jointly collected items is obtained unlawfully, that is, without legal entitlement, in respect of amounts previously paid. Parties liable to pay contributions are entitled to a full or partial refund of amounts collected in error, unless payment of those contributions was made in bad faith, in other words, with the clear intention of artificially inflating future Social Security benefits.
The right to a refund of amounts paid unlawfully must be grounded in a factual or legal error arising in connection with the settlement and payment of the debt, and requires the processing of the appropriate refund procedure. The procedure, initiated at the request of the party concerned, must set out the facts and reasons clearly identifying the error made in the self-assessment (or in the assessment carried out by the Social Security administration), or in the payment made, on the basis of which the refund of the unduly paid amount is sought.
Criminal liability arises from conduct that, through deception, triggers an undue refund, not merely from the fact of obtaining an undue refund.
Article 307 of the Criminal Code penalises the use of deceptive manoeuvres in the data provided, or through other means (documentary fraud), that lead to an administrative refund decision which would not have been granted but for the deception. This does not cover refunds obtained through administrative processing errors that were not induced by the applicant and are attributable solely to a mistake on the part of the administrative body.
· IMPROPER USE OF DEDUCTIONS:
The improper use of deductions under any heading also gives rise to criminal penalties. This occurs whenever contribution debts are reduced through the malicious and incorrect application of the regulations governing Social Security contributions and jointly collected items.
The concept of deductions is interpreted broadly, and encompasses bonuses, reductions and any other deductions applied to Social Security contributions and jointly collected items. It does not, however, extend to subsidies, tax reliefs or grants, the fraudulent obtaining of which is specifically penalised under Article 308 of the current Criminal Code.
AMOUNT OF THE FRAUD:
The amount of the fraud must exceed fifteen million pesetas. Only from that threshold does the conduct warrant criminal sanction; cases involving lesser amounts are left to administrative penalty law.
The period over which the fifteen million is calculated is that of each settlement, refund or deduction (each individual transaction), or a period of one calendar year where those transactions are not one-off but are carried out periodically at intervals of less than twelve months. The statutory requirement is to treat the total amount defrauded over the calendar year as a single offence against Social Security.
PERSONS WHO MAY COMMIT THE OFFENCE:
Since this is a criminal sanction, it can only apply to natural persons, namely the sole trader and, in the case of legal entities, the natural person responsible for the obligation to make Social Security contributions.
The passive subject is the General Social Security Treasury, as a common service with its own legal personality in which all the financial services of the Social Security system are unified; but it may also be FOGASA and INEM where the fraud affects jointly collected items (contributions for unemployment and to FOGASA, which are settled and collected together with general contingency contributions).
COMPLETION OF THE OFFENCE:
This is a result-based offence, meaning that it is only completed once the financial harm has been caused to Social Security.
In cases involving evasion of contribution payments, the offence is completed at the moment the statutory deadline for payment expires (not the deadline for submitting properly completed contribution documents, where there is no concurrent obligation to make the resulting payment).
In cases of improper refunds, the offence is completed upon receipt of those refunds.
In cases of improper deductions, the offence is completed when they are applied in the contribution documents submitted.
GROUNDS FOR EXEMPTION FROM CRIMINAL LIABILITY:
It is the criminal court judge who determines whether the circumstances set out in Article 307(3) are present in the conduct of the person liable. Regularisation of one's position means bringing one's situation into order with Social Security, whether by paying the debt, filing a self-assessment, or acknowledging its existence by submitting contribution documents, provided this is done before the person concerned is notified of the commencement of inspection proceedings by the Social Security administration or the relevant supervisory bodies, or before a formal complaint or criminal charge has been brought by the Public Prosecutor or by the Social Security's legal counsel. This is because the exemption applies only to voluntary regularisation, not to action taken in response to proceedings already under way.
The scope of this exemption also extends to documentary fraud offences that are purely instrumental in nature, that is, offences committed with the aim of concealing the debt and carried out prior to voluntary regularisation. Third parties do not benefit from this exemption automatically; in order to rely on it, they must have actively contributed to remedying the harm caused.
Regularisation is sufficient if it consists merely of correcting the false information provided, or disclosing the information that was withheld, without it being necessary to also pay the outstanding amount, since what is penalised is the evasion or concealment of information.
