Criminal Defence for Social Security and Subsidy Fraud

What Social Security Fraud Is

Article 307 of the Criminal Code punishes anyone who, by action or omission, defrauds the Social Security by evading the payment of contributions and joint collection items, unduly obtaining refunds or enjoying undue deductions, provided the amount defrauded exceeds 50,000 euros. The penalty is one to five years in prison and a fine of one to six times that amount. The provision also contemplates an aggravated type (Art. 307 bis) and a specific type for the fraudulent obtaining of Social Security system benefits (Art. 307 ter).

The mere filing of contribution documents does not exclude the fraud when it is proven by other facts. Alongside the penalty, the loss of the possibility of obtaining subsidies or public aid and of enjoying tax or Social Security benefits or incentives is imposed.

Subsidy and Public Aid Fraud

Article 308 of the Criminal Code punishes anyone who obtains subsidies or aid from Public Administrations, including the European Union, for an amount exceeding 100,000 euros, by falsifying the conditions required for their grant or concealing those that would have prevented it. The same penalty applies to anyone who, in an activity funded with public funds, applies them, for an amount exceeding 100,000 euros, to purposes other than those for which the aid was granted. The penalty is one to five years in prison and a fine of one to six times the amount. The management of European funds has increased the relevance of this figure.

The Thresholds: 50,000 and 100,000 Euros

The amount is decisive. The offense of defrauding the Social Security requires exceeding 50,000 euros; subsidy fraud, 100,000 euros. Below those thresholds, the conduct does not constitute a crime but an administrative offense punished through the corresponding channel. Determining the exact amount is therefore one of the central grounds of the defense, and usually requires expert evidence. The aggravated type of Art. 307 bis is reserved for cases of especially high amounts or of particular gravity due to the manner of commission.

Regularization and Repayment

Both Article 307 and Article 308 provide for an exemption: full regularization of the situation before the Social Security and repayment of the subsidy exclude criminal liability, provided they are carried out in good time —that is, before the obligated party becomes aware of the start of verification or investigation actions and, failing that, before a complaint or indictment is filed or the Public Prosecutor or the judge take action. Assessing whether regularization or repayment are still possible is one of the defense's first decisions.

Defense Strategy

The defense is built on several axes. Quantification expert evidence, to dispute whether the threshold that turns the conduct into a crime is actually exceeded. The analysis of intent, because a reasonable interpretive discrepancy or an error is not equivalent to fraudulent intent. The assessment of regularization or repayment while they are still possible. And coordination with the administrative procedure of the General Treasury of the Social Security or of the body granting the subsidy.

From the Inspection Report to the Criminal Case: How the Procedure Begins

The vast majority of these cases do not start with a complaint, but with the work of the Inspectorate. When the Tax Agency, the Social Security General Treasury or the body managing a public grant detect signs of fraud exceeding the criminal threshold, they halt the administrative route and pass what is known as the tanto de culpa to the Public Prosecutor or the court. That file, with its technical report and its calculation of the allegedly defrauded amount, becomes the backbone of the prosecution. Knowing that file from the very first moment is decisive: many defences are won or lost by what was, or was not, done during the prior inspection phase.

Once in the criminal arena, the Prosecutor assesses whether the facts fit Art. 307 (Social Security fraud), Art. 308 (grant fraud) or the tax offence of Art. 305, and files the complaint or accusation where appropriate. One point that is often misunderstood deserves emphasis: these offences do not fall to the National High Court. Save where they are connected to other offences the law expressly assigns to that body, the case is tried by the ordinary courts of the territory where the fraud was committed.

The competent court is determined by the abstract penalty of each offence. Art. 305 and Art. 307, punishable by one to five years' imprisonment, are tried before the Criminal Court (Juzgado de lo Penal); the aggravated types of Art. 305 bis and Art. 307 bis, carrying two to six years, fall to the Provincial Court (Audiencia Provincial). A concurrence of offences does not by itself move the case up to the Provincial Court: what matters is the maximum penalty laid down in the abstract for each figure, not the sum of the sentences sought in the indictment.

Forensic Accounting Evidence and Calculating the Defrauded Amount

The heart of these cases is a single figure: the defrauded amount. Whether the statutory threshold is crossed depends on it (over 50,000 euros under Art. 307, over 100,000 euros under Art. 308) and, therefore, whether an offence exists at all. That quantification is never a neutral fact; it is the result of a technical calculation open to debate. The report of the Inspectorate or of the Social Security actuaries is not an indisputable truth, but one more piece of expert evidence, subject to cross-examination at trial like any other.

The defence can and often does submit its own forensic accounting report. The usual points of friction are the calculation base, the periods taken into account, the temporal allocation of the contribution bases or of the subsidised amounts, the expenses or deductions rejected by the Administration, and the accrual criteria. Small corrections to any of these parameters can bring the amount below the criminal threshold, turning the matter from an offence into a mere administrative infringement, with radically different consequences.

For this reason the work of the party-appointed expert is not an add-on but a central piece of the strategy. Challenging the methodology of the official report, detecting double-counting, identifying wrongly allocated items or disputing the apportionment criteria is, in many cases, the most effective way to bring the figure below the statutory limit or, at the very least, to sow the reasonable doubt a criminal conviction requires.

Administrative Assessment and Criminal Proceedings: The Self-Standing Penal Route since LO 7/2012

For years, the start of criminal proceedings for fraud against the Public Treasury or Social Security froze administrative action: the debt was suspended pending the criminal judgment, under the classic preliminary-question scheme. The reform brought in by Organic Law 7/2012 changed that logic. Today the Administration may assess and, where appropriate, collect the debt linked to the alleged offence without waiting for the outcome of the criminal proceedings, which run along their own self-standing track.

This means a taxpayer or grant beneficiary may face two fronts at once: the assessment and collection by the Administration on one side, and the criminal charge on the other. The two routes are not entirely independent —the criminal judgment still prevails as to the facts the court declares proven— but their parallel handling demands careful coordination, so that what is stated in the administrative forum does not damage one's position in the criminal process, and vice versa.

Here it is important not to mix up two time limits that follow different logics. The tax or contribution debt prescribes, in the administrative sphere, after four years. Criminal liability for the offence follows the rules of Art. 131 of the Criminal Code according to the penalty: five years for Art. 305 and Art. 307 (penalty of one to five years) and ten years for the aggravated types of Art. 305 bis and Art. 307 bis (penalty of two to six years); grant fraud under Art. 308 also prescribes after five years. The fact that the debt is administratively time-barred does not mean the offence is, nor the other way around.

Liability of the Adviser, of the Company, and Routes to Reparation

These offences rarely involve a single person. The tax adviser, manager or accountant who designs or executes the fraudulent scheme may be criminally liable as a necessary cooperator, if their contribution was essential to the commission of the act. Having given advice is not enough: the decisive line lies between professional advice given in good faith on data supplied by the client and active, knowing participation in the concealment or deception. Drawing that line precisely is essential both for the adviser and for the client, whose defences may come into conflict.

Where the fraud is committed within a company, the criminal liability of the legal person under Art. 310 bis comes into play, providing for fines and, where appropriate, other consequences for the company itself, independently of the liability of its directors. A serious and effective tax-compliance programme, in place before the events, can mitigate or exclude that corporate liability, which makes prevention part of the defence itself.

Finally, it is worth distinguishing the regularisation of Art. 307.3 and Art. 308.6 —which extinguishes liability if it is complete and spontaneous— from late reparation. Where the absolutory excuse is no longer available, acknowledging the facts through a guilty plea (conformidad) and repaying the defrauded sum plus interest can operate as mitigating factors and substantially modulate the sentence. The civil liability arising from the offence comprises precisely that defrauded amount increased by interest, a figure that can also be contested on technical grounds.