One of the most frequent concerns among foreign residents in Spain is the belief that the Spanish tax office can empty their bank account without prior notice. While the tax authorities do have the power to freeze funds (embargo) in certain circumstances, this is never an automatic or arbitrary process.
Although Hacienda is sometimes viewed as a cold, relentless machine whose only aim is to make life difficult, the reality is that it must operate within a strict legal framework. Certain formalities must be respected before any embargo can be enforced.
These include prior notification, clearly defined payment deadlines, and the eventual commencement of collection actions if the debt remains unpaid.
How unpaid taxes can lead to an embargo
When a tax debt remains unpaid after the deadline for voluntary payment, the situation enters what the Spanish system refers to as the executive period, and the tax authorities may initiate collection actions.
A formal demand for payment is then issued, which includes the outstanding amount, surcharges and interest. If the debt is still not settled, the authorities may proceed with an embargo of the taxpayer’s assets.
In practice, this stage is usually preceded by a formal inspection process, especially when the debt arises from a discrepancy in a tax return. The procedure typically involves:
- A notice of inspection and request for documentation
- A draft assessment (propuesta de liquidación)
- A final tax assessment (liquidación)
It is also worth noting that not all embargoes initiated by the Spanish tax office come from unpaid taxes. Hacienda often acts as the collection authority for other public bodies, such as regional governments, local councils, the traffic authority (DGT), and even the Social Security administration. This means that unpaid traffic fines, council tax, or certain public fees can also result in bank account embargoes, following a similar process of notification.
Only if the final assessment is not paid within the voluntary period will the authorities begin the process to recover the debt, which may include an embargo.
What is subject to embargo first?
Hacienda is legally required to follow a specific order of priority when seizing assets. This order prioritises liquid assets first, and only if these are insufficient, moves on to assets that are less liquid.
The general order is:
- Bank accounts
- Receivables, securities, and financial instruments
- Salaries and pensions
- Real estate, business premises, and rental income
- Valuable items such as jewellery or antiques
In practice, this means that bank accounts are almost always the first target. Even when the tax office proceeds with a bank account embargo, they respect some limits:
Joint accounts
If the account has multiple holders (not simply authorised users), the law presumes that the balance is divided equally between them. Hacienda may only seize the proportional share corresponding to the taxpayer in debt.
Accounts used to receive salaries or pensions
When the account is used to receive employment income or pensions, the same legal limits that apply to deductions from salary also apply to the funds held in the account.
In general:
- The portion of income that is equal to or below the Spanish minimum wage (SMI) is fully protected and cannot be seized.
- Amounts exceeding the SMI may only be seized partially, following a progressive scale established by law.
New, more flexible interpretation by the TEAC
Historically, the tax office interpreted these limits in a very strict way: it only protected the salary or pension income received in the current or previous month, and considered any additional balance fully subject to embargos.
However, a more recent decision by the Central Economic-Administrative Court (TEAC) has changed this approach. The TEAC ruled that savings made up of previously protected salary or pension income should also be considered exempt from seizure.
Example:
Imagine a person receives a monthly pension of 800€ (below the minimum wage), and the balance in the account is 2.000€. Under the new interpretation, the entire balance is protected, because the additional 1.200€ derives from previous pension payments that were also exempt at the time.
This shift is especially relevant for vulnerable individuals and ensures that those who save are not penalised for keeping their funds in the bank.
Avoiding unpleasant surprises from the tax office
Although the Spanish Tax Office does have the power to place an embargo on any Spanish bank account, this is never the first step in the process, and there are important legal protections in place.
If you receive a payment demand from Hacienda or suspect that an embargo may be applied, it is crucial to act quickly. In some cases, excessive embargos may be challenged and reversed.
It is important to bear in mind that the Spanish Tax Office will always send formal notices to the address it has on record for you. If your tax address is out of date or you miss a notification, you could easily find yourself in embargo proceedings without having had the chance to respond or resolve the issue beforehand.
For this reason, it is strongly recommended that everyone, tax residents and non-tax residents, in Spain ensure their official tax address is correct and monitored. In many cases, it is advisable to use the address of a professional adviser who will receive and manage notifications on your behalf.
